The dream of homeownership is slipping further away for many Australians, as new analysis shows first-home buyers face an “impossible choice” between saving six-figure deposits or taking on unaffordable debt.
Analysis of PropTrack median price data reveals that even with government support, entry into the housing market remains a major challenge.
Buyers either need to save a 20% deposit that now regularly exceeds $150,000, or qualify for a 95% loan under the federal First Home Guarantee — an option that drastically increases repayment costs.
The government-backed guarantee allows eligible buyers to purchase with smaller deposits and avoid lenders’ mortgage insurance, and its expansion was a key Albanese government re-election pledge.
But the benefit comes at a price. Higher loan-to-value (LVR) ratios mean steeper repayments — up to $9,000 more per year for a typical apartment purchase compared to buyers using a 20% deposit, The Daily Telegraph said.
In a further headwind for buyers, the Reserve Bank (RBA) has held its cash rate at 3.6% and cautioned that house prices and rents are set to rise in 2026, hinting that near-term rate relief may be limited.
In Brisbane, a median house now costs $1.12 million, above the $1 million price cap for the scheme.
A 20% deposit would require about $225,000 in savings, plus stamp duty.
Buyers eyeing Brisbane’s median unit price of $770,000 could qualify for the scheme, but would face monthly repayments of about $4,150 — nearly $7,900 more per year than with a 20% deposit.
To meet affordability benchmarks (repayments capped at 35% of income at a 5.5% rate), the loan would require a minimum annual household income of $142,000, well above the $110,000 average for Queensland households.
Sydney remains Australia’s toughest market for first-home buyers.
The city’s median house price of $1.62 million exceeds the scheme’s $1.5 million cap, meaning buyers must rely on traditional savings — and a $324,000 deposit. Even at the median unit price of $874,000, buyers need $175,000 upfrontfor a standard 20% deposit.
Those opting for a 95% loan would face a monthly mortgage bill of around $4,700, roughly $8,950 more per year than those with larger deposits.
Servicing that debt would require an annual household income of at least $161,000 — an “extraordinary” threshold for a first-time buyer in Sydney’s market.
In Melbourne, where the median house price sits at $1.01 million, buyers just miss out on the $950,000 cap. A 20% deposit would mean $201,000 upfront.
For a median unit at $625,000, those using the First Home Guarantee would need to earn about $116,000 a year to service a 95% loan — and would pay around $6,400 more annually in repayments compared to a 20% deposit.
In Adelaide, the median unit price of $655,000 would see similar results. A 95% loan would require repayments of $3,530 a month, versus $2,975 with a full deposit. The higher debt load would demand an income of at least $120,000 a year.
Finder personal finance expert Sarah Megginson (pictured left) said buyers are going to great lengths to improve their borrowing chances.
“Lenders are scrutinising household spending more than ever, which means everyday purchases – from dining out to digital subscriptions – can be the difference between a loan approval and a rejection,” Megginson told The Daily Telegraph.
“Consumers aren’t just cutting back on luxuries; many are reworking their entire financial lives to prove to lenders they’re a safe bet. The fact that so many are cutting back just to refinance reveals how tight the credit environment is. It’s no longer enough to have equity, you need spotless spending habits too.”
Finder’s data shows 35% of Australians don’t believe they will ever afford their own home.
“Some are putting major life plans on hold, from starting a family to upgrading a car, in a bid to keep or qualify for a mortgage,” Megginson said. “It’s a stark reminder that homeownership now dictates how, and when, Australians live their lives.”
With affordability stretched, households are increasingly turning to debt to get by.
According to Compare the Market’s 2025 Household Budget Barometer, half of Australians (50%) have credit card debt, up 9% from last year.
Economic director David Koch (pictured right) said Australians are being forced to rely on short-term credit to meet daily expenses.
“When the bills and everyday life expenses continue to pile up, Australians are unfortunately resorting to credit cards, buy now, pay later, and personal loans in order to fulfil their lifestyles,” Koch said.
“Whether it’s shopping for Christmas presents or trying to pay high medical bills, money is tight for many. People can’t afford to wait and save up; they need the money now.”
For mortgage brokers, the analysis underscores a widening gap between housing accessibility and borrowing capacity. While the First Home Guarantee provides a pathway for some clients, high LVR lending will continue to require careful affordability checks and robust financial coaching.
With household budgets tightening and serviceability tests remaining stringent, brokers may play a growing role in helping first-home buyers balance borrowing risk with long-term stability.
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