The Coalition’s proposal to let first-home buyers deduct mortgage interest from their tax bill comes at a time when investors are dominating the market.
While well-intentioned, Loan Market Group data shows the measure is unlikely to significantly improve access to home ownership unless deeper affordability and borrowing constraints are addressed.
Loan Market Group’s national mortgage data – drawn from a network of more than 4,000 brokers – shows investor loan approvals increased 18% year-on-year in the March quarter. First-home buyer activity, by contrast, continues to lag in many areas.
David McQueen, CEO of Loan Market, said in key regions like Coastal Sydney and Greater Western Sydney, affordability constraints have pushed first-home buyer participation to historically low levels.
Despite making up 20% of the population, our data shows Sydney accounts for just 11% of first-home buyer applications by number and 16% by value.
“The numbers don’t lie – first-home buyers are still playing catch-up,” he said.
“When investors make up almost half of new loans in some regions, it’s a tough environment for those trying to buy their first home.”
“This policy recognises the need for targeted support, and that’s a step in the right direction. But a tax break alone won’t fix what’s fundamentally a pricing and borrowing capacity problem.”
Where first-home buyers are gaining ground, it’s in more affordable markets. South Australia and Queensland posted the strongest annual growth in mortgage approvals – 24% and 21% respectively. In contrast, Victoria is stagnating at just 3%. Far North Queensland, the Sunshine Coast, and regional NSW are among the few bright spots.
There’s a real opportunity to improve outcomes for first-home buyers by revisiting how lending rules are applied, especially in a high-rate environment where borrowing power is under pressure.
“Australians applying for a home loan face a 3% serviceability buffer, so if your rate is 6%, you need to show you can afford 9%,” McQueen said.
“That made sense when rates were low. But in today’s high-rate, high-cost environment, it’s locking out capable borrowers, especially first-home buyers and that’s the real opportunity for our political parties to influence and address.”
With Australia’s largest broker network and direct visibility over lending trends, Loan Market Group provides one of the most accurate and timely insights into borrower behaviour. Brokers now service 76% of all residential mortgages in Australia.
“Loan Market will always support ways to get more people into more homes,” McQueen said.
“But the policy needs to reflect the reality: unless we adjust the rules that decide who can borrow and how much, we’ll keep locking out the very people we’re trying to help.”
