Rate cuts and lower mortgage rates are expected to help more first-home buyers enter the property market in the coming year, according to the newly released PropTrack CommBank First-Home Buyer Report 2025.
The report, produced by REA Group in collaboration with CommBank, analyses current market conditions and opportunities for first-home buyers across Australia.
The Reserve Bank has delivered three rate cuts in 2025, most recently lowering the cash rate by 25 basis points to 3.6%. These moves, driven by easing inflation and a still-tight labour market, are expected to further support borrowing demand and improve affordability for first-home buyers.
The report found that while first-home buyers continue to face tough affordability and mortgage serviceability conditions, recent and expected interest rate cuts by the Reserve Bank are reducing mortgage costs and making a larger share of homes more affordable.
“Saving for a deposit is the key hurdle for first-home buyers, creating a substantial savings burden,” said Angus Moore (pictured), REA Group senior economist. “On top of this, record low housing affordability and tough mortgage serviceability have been significant challenges.”
Despite these challenges, the report notes that there were more first-home buyers in the past year than was typical a decade earlier, indicating that many are still finding ways to enter the market.
“Despite these conditions, first-home buyers are finding ways to enter the market,” Moore said. “Recent government policies, low deposit loans and Lenders Mortgage Insurance are key enablers helping first-home buyers purchase. Many also seek homes in more affordable areas or purchase semi-detached homes or units to overcome affordability challenges.”
Many first-home buyers are taking advantage of government grants and schemes, purchasing with smaller deposits, or buying in more affordable areas.
According to CommBank, the average loan-to-value ratio for a first-home buyer is around 85%, meaning many are buying with a deposit of less than 20%.
The report highlights that four of the top five first-home buyer hotspots are in Melbourne, with the most popular areas attracting almost twice as many first-home buyer searches as the national average.
First-home buyers are more likely to buy units or semi-detached homes compared to subsequent home buyers. For much of the past five years, around 6% of first-home buyers have chosen to rentvest – leasing out an investment property instead of living in it – to enter the market sooner.
Despite the improved outlook, affordability remains a significant barrier.
The report found that an average income household would need to save for nearly six years to accumulate a 20% deposit for a median-priced home.
Housing affordability is at its lowest level since 1995, with a typical first-home buyer household aged 25-39, currently renting and earning $129,000, able to afford just 17% of homes sold in the past year.
“The good news for first-home buyers is that conditions are improving,” Moore said. “Interest rates have already fallen from their peak, and further cuts are expected. While home prices are rising, lower mortgage rates will likely help put more homes within reach of first-home buyers.”
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