First home buyers are the only cohort making more loan applications amid a distinct drop in the property market.
Undeterred by changing market conditions, first home buyers are taking the opportunity to get into the market as property prices fall, taking advantage of a less heated market and the federal government's expanded 5 per cent deposit scheme as competition for properties hitting the market drops.
The new data from mortgage broker network Loan Market shows that new entrants to the market are the only cohort applying for more loans than they were in June.
Changes to negative gearing and capital gains tax announced in the budget in May have taken some of the heat out of the property market as investors hit pause for a period of time to decide how to proceed in a market no longer geared towards investors being able to make maximum bang for their buck.
Bureau of Statistics data shows the big four banks are reporting falls of up to 20 per cent in new home loan applications since May.
Residential loan commitments fell 5.4 per cent to 134,225 in the June quarter 2026 during the same period.
Commonwealth Bank has revealed that home loan applications have fallen 15 per cent since May.
ANZ has revealed that mortgage application values were broadly flat in the third quarter, while National Australia Bank expects weaker credit demand and predicts that house prices could fall around 7 per cent.
While the falls in home loan applications are a dire sign of the times, a closer look at the data shows that first home buyers are stepping forward to make the most of a drop in property prices to make their move.
August brought 13 per cent more loan applications with lenders than in June, which shows some potential return in confidence according to Loan Market.
But this national data differs between states and territories. For example, in the ACT home loan applications from first home buyers are tracking about the same in the first three weeks of August as the three weeks before the May budget.
Loan Market credit expert Shay Waraker says these are the first signs of first home buyers gaining confidence in the market.
"The three cash rate increases this year have impacted borrowing capacities, which, combined with the higher cost of living, has made it more challenging to get into the market.
"However, following the tax changes announced in the Budget, investors are not as active in the market, which could help open the door for first home buyers," Waraker says.
Meanwhile the Reserve Bank of Australia has introduced three rate rises this year, bringing the cash rate to 4.35 per cent.
While rates remained on hold at the last board meeting, persistent above-target inflation has led to some lenders predicting another rate rise later this year.
Analytics firm Cotality predicts the bottom of the current property downturn could be around May, June or July 2027.
This means that more first home buyers trying to time the bottom of the current market dip could still be circling the market looking for the right opportunity to make their move.
"Mid-next year could be a realistic turning point, depending on other data, such as whether the Reserve Bank has enough confidence that inflationary pressures are under control," Cotality head of research Gerard Burg says.
However, he warned first home buyers against trying to time the bottom of the market.
"While there is an incentive to try and time the market to wait for the bottom of the dip, we tend to observe is that if you intend to hold a property for a considerable amount of time, such as 10 to 20 years, kicking the bottom of the cycle is less important than finding the right property for you.
"If you're a first home buyer and you find the right property in April next year or in January, then don't wait," Burg says.
