First Home Buyers in 2026: Are Investors Finally Stepping Back?

The whole market slowed — but investors pulled back much harder

The latest Australian Bureau of Statistics lending data gives us a pretty clear starting point. The number of new home loans fell 5.4% in the June quarter of 2026, taking total new dwelling loan commitments to 134,225.

That sounds like a broad housing slowdown, and it is. However, the interesting part appears when you separate the different types of borrowers.

Investor loan numbers fell 8.6% during the quarter. Owner-occupier loans fell 3.3%, while owner-occupier first home buyer loans fell by a smaller 2.9%.

That matters because competition is part of the first home buyer equation. When fewer investors are bidding for the same established homes, some buyers may find themselves facing a little less pressure than they did in a hotter market.

The ABS figures are loan commitments rather than a direct count of property purchases, so they should not be treated as a perfect measure of buyer activity. Still, they give us a useful picture of where new borrowing is moving.

Investor lending in Victoria fell 14.2%

For Melbourne and Victorian buyers, the state numbers are particularly relevant.

Investor loan commitments in Victoria fell 14.2% in the June quarter. NSW recorded a 15.5% fall, while Queensland was down 10.1%.

In other words, Victoria was one of the states where the retreat in investor borrowing was most pronounced.

Property markets are local. A two-bedroom unit in Melbourne's north-west can behave very differently from a family home in another suburb, and both can behave differently from national averages.

That is why we would never suggest buying simply because a national headline says the market has softened.

First home buyer applications appear to be moving again

The June quarter tells us where lending has been. More recent application data gives us an early indication of what may be happening next.

Loan Market data reported on 24 August showed first home buyer applications fell around 3% in July, then increased by about 10% in the first half of August on a weekly-average basis.

According to that data, first home buyers were the only major borrower group submitting more applications than they were in June.

It is early data, so we are not calling it a boom. One fortnight does not make a property cycle. However, it is enough to suggest that first home buyers in 2026 are worth watching closely.

Several things are lining up at the same time

There probably is not one single reason for first home buyers becoming more active. Instead, several parts of the market are shifting together.

We recently looked at the broader question of whether falling house prices are creating a better first home buyer opportunity. The newer lending figures add another piece to that story: investor demand is not holding up as strongly as first home buyer demand.

A smaller deposit can solve one problem — not every problem

The Australian Government 5% Deposit Scheme has changed the deposit conversation for eligible buyers.

Under the current scheme, eligible first home buyers can potentially purchase with a deposit from 5% without paying standard lenders mortgage insurance. Income caps and place limits were removed when the scheme expanded.

In Victoria, the current property price cap is $950,000 for Melbourne and Geelong and $650,000 for other Victorian areas.

That distinction is important. A buyer still has to satisfy the lender's assessment of income, expenses, existing debts, credit conduct, borrowing capacity and the property being offered as security.

If you want the lending side explained without the alphabet soup, our first home buyer guide walks through the process from deposit and pre-approval through to settlement.

A 5% deposit also means starting with a thinner equity buffer

There is another side to low-deposit buying that deserves a proper explanation.

If you borrow close to 95% of a property's accepted value, you begin with a much smaller equity buffer than somebody purchasing with a 20% deposit.

If the property value then falls, your equity can reduce quickly even though you have done nothing wrong and continued making every repayment.

This does not automatically make a 5% deposit loan a bad idea. It simply means the buyer should understand the structure and think beyond settlement day.

You can read our plain-English explanation of loan-to-value ratio (LVR) if you want to see exactly how a 90%, 95% or lower LVR changes the numbers.

A cheaper property does not automatically mean an easier home loan

This is probably the most important part of the story.

Property prices can soften while borrowing remains difficult. Lenders still assess whether the loan is affordable, and higher interest rates can reduce borrowing capacity even when the purchase price looks better.

A first home buyer can therefore find a property that looks like better value than it did six months ago and still discover that the lender will not provide the amount they expected.

Before making offers, it is worth knowing your realistic borrowing range, estimated repayments and cash contribution. Our Mortgage Lab can help you model deposits, repayments and different rate scenarios before you start.

The market may be becoming friendlier — but there is no universal green light

First home buyers in 2026 appear to be entering a different market from the one many faced during the recent property rush.

Investor lending has fallen. Victorian investor activity has dropped particularly sharply. Some property markets are softer, and the 5% Deposit Scheme has reduced one of the biggest barriers to entry for eligible buyers.

At the same time, finance is not necessarily easier. Rates remain important, serviceability still matters and higher-LVR buyers need to understand what a small equity buffer means.

So, are investors stepping back enough to create an opportunity?

For some first home buyers, potentially yes.

But the opportunity is not simply "prices are down, go buy something". It is having less competition, understanding your numbers and being ready to act if the right property appears at a price you can comfortably afford.