First home buyer loans fell 4.3% in March 2026

Fresh data from the Australian Bureau of Statistics shows the number of new first home buyer loans fell 4.3 per cent in the March quarter of 2026 - the first quarterly drop after strong growth through all of 2025. Three consecutive rate hikes have now lifted the cash rate to 4.35 per cent, and the figures give the clearest picture yet of how higher borrowing costs are reshaping who is making it through to settlement.

What the ABS data actually shows

In the three months to March 2026, 139,794 new home loans were settled nationally, a fall of 6.2 per cent from the December quarter. For first home buyers specifically, loan volumes dropped 4.3 per cent - equivalent to 1,349 fewer loans compared to the prior quarter.

The quarterly decline follows a 6.5 per cent rise in December 2025, when the expanded 5% Deposit Scheme and a period of rate stability drove a surge in first home buyer activity. Despite the step back in Q1, first home buyer lending is still 5 per cent higher through the year, meaning the cohort remains larger than a year ago even as momentum softens.

• Average first home buyer loan size: $607,624 in the December quarter 2025 - a record 8.5% rise over the prior quarter, reflecting that buyers are stretching further as entry-level prices remain elevated
• Total new lending value: $103 billion in Q1 2026, down 3.8% from December quarter but still 18.5% higher through the year
• State breakdown: Falls in every state and territory except the ACT (+6.5%); largest declines in Queensland (-5.8%), Victoria (-4.5%) and New South Wales (-4.1%)

Why the slowdown happened - and what drove it

The March quarter data covers a period when the RBA delivered rate hikes in both February and March 2026, before a further increase in May brought the cash rate to its current 4.35 per cent. Each 0.25 percentage point rise reduces the amount a buyer can borrow under standard serviceability assessments.

Notably, analysis from savings.com.au points out that this lending slowdown arrived before the federal budget landed on May 12. The cooling in Q1 is a rate story, not a policy story. The budget's negative gearing and capital gains tax changes are yet to fully flow through to purchasing decisions, and their effect on the established market will take longer to measure.

For first home buyers, the constraint is twofold: higher repayments reduce the income available to service a given loan size, and lenders' serviceability buffers (assessed at the loan rate plus 3 per cent) tighten maximum approved amounts further. A buyer pre-approved for $580,000 when the cash rate sat at 3.85 per cent in January 2026 may qualify for noticeably less under today's conditions.

What a quieter market means for buyers who are still active

Fewer buyers in the market does not automatically mean lower prices, but it does shift the negotiating balance. Cotality data from May 2026 shows vendor discounting has risen to 3.1 per cent nationally, up from near zero at the peak of the 2025 cycle. Sydney and Melbourne recorded monthly value falls of 0.6 per cent in April, while auction clearance rates across the capitals have settled in the low 60s, compared to above 65 per cent in early 2025.

In practical terms, buyers have more room to negotiate on price and conditions than at any point in the past 18 months. Properties are sitting on the market longer, and the pressure to waive standard contract conditions to compete has eased in the cities where values have softened.

The picture varies sharply by location. Perth recorded a monthly gain of 2.5 per cent in April, Brisbane is up 1.8 per cent, and Adelaide up 1.2 per cent. The cooling is concentrated in Sydney and Melbourne. If you are buying in a mid-sized capital, expect real competition - the market there has not paused.

What first home buyers should do right now

The data presents a mixed picture. The path is narrower because of rate hikes, but buyers who remain eligible are working in better negotiating conditions than the recent market peak. Here is how to approach the next few months:

• Recalculate your borrowing capacity. Three rate hikes since the start of 2026 have changed what lenders will approve. Run current numbers rather than relying on estimates from even six months ago - the difference can be significant.
• Factor in June 16. The next RBA meeting is June 16. ANZ, CBA and NAB are forecasting a pause; Westpac still expects two more hikes before year end. Stress-testing your repayments against a further 0.25 to 0.50 per cent rise is a sensible step before committing to a purchase.
• Re-check scheme eligibility. The Australian Government 5% Deposit Scheme now has unlimited places and no income caps, following the October 2025 expansion. Eligible buyers avoid lenders mortgage insurance on a deposit as low as 5 per cent. If you have not confirmed eligibility since the scheme was updated, it is worth checking again.
• Use the vendor discount data. A 3.1 per cent national vendor discount rate means there is meaningful room in many markets. Bring comparable sales data to negotiations and work with a conveyancer who knows local conditions.
• Consider your target state. The ACT bucked the national trend with a 6.5 per cent rise in first home buyer lending in Q1. Perth, Brisbane, and Adelaide remain active markets where competition is real and prices are still rising month on month.

Run the numbers

Use these tools to work out your current position with updated rate assumptions:

• Borrowing Power Calculator - see what the current 4.35% cash rate means for your maximum loan size compared to earlier this year
• Interest Rate Shock Tester - stress-test your monthly repayments against a further rate rise before the June 16 RBA decision
• Scheme Comparison Tool - compare the 5% Deposit Scheme, Help to Buy, and state-based grants side by side for your situation
• LMI Calculator - see how much lenders mortgage insurance you can avoid with the right scheme and deposit size