Home loan surge: 5 per cent home deposits spark buying frenzy

Demand for home loans worth up to $1 million has exploded by 70 per cent as first home buyers rush to exploit looser government rules which include the five per cent deposit scheme.

First home buyers are splurging following October’s changes to the federal government’s Home Guarantee Scheme which included the introduction of five per cent deposits.

Latest data from credit reporting agency, Equifax, finds demand for new homeowners surged by 14.2 per cent year-on-year in October, driven by first home buyers taking advantage of the scheme.

“In October 2025, we observed a 14 per cent increase in FHB activity and an incredible 70 per cent increase in demand for new First Home Buyers applying for loans specifically in the $750k – $1m loan size range,” said Equifax’s Executive General Manager, Moses Samaha.

Equifax’s Executive General Manager, Moses Samaha

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October’s changes saw many of the scheme’s restrictions lifted specifically with the removal of a cap on the number of first home buyers applying for the initiative, the removal of income limits, and the increase in the value of properties eligible for the program.

“This specific loan bracket appears to be policy-driven. When we overlay the surge in $750k – $1m loans against the FHB Deposit Scheme price caps, a clear trend appears,” he said.

“Once you account for a 5 per cent deposit, the resulting property values sit squarely against the Federal Government’s price ceilings for most capital cities and regional centres across the country - with Sydney and large NSW regional centres being the notable exception due to their higher price cap of $1.5m.”

The surge in first homeowner interest underpinned the wider market, which saw home prices across Australia jump 1.1 per cent in October, the strongest monthly rise since June 2023.

Equifax data shows that overall demand for new home loans increased by 14.2 per cent year-on-year in October. However, Mr Samaha cautions that this growth may be fragile.

“Despite the significant momentum in October, we expect new homeowner demand could slow down due to fading optimism for near-term rate relief, with some of the recent activity likely driven by the anticipation of rate cuts that have not, and may not, arrive - offsetting any boosts from the federal scheme .”

The changes to the federal government's First Home Guarantee scheme, announced by housing minister Clare O'Neill have created a new buyer frenzy.

“We’re operating in a complex environment, we have high demand from policy-incentivised First Home Buyers clashing with historically low inventory. This could put more pressure on house prices and further create affordability challenges” said Mr Samaha.

First home buyers are rushing the market after the federal government relaxed restrictions on its First Home Guarantee Scheme Picture: Fiona Killman

Equifax also found borrowers are sticking with their existing lenders, as financial institutions work harder to lock in customers and the prospect of finding a lower interest rate with a new provider dwindles.

“In early 2023, external switching dominated the market, accounting for nearly 60 per cent of activity. As of October 2025, that gap has effectively closed,” Mr Samaha noted.

“The split is now 51 per cent external switching vs. 49 per cent internal refinancing. Borrowers are still shopping around for better deals, but lenders are increasingly finding ways to keep them on the books rather than letting them walk out the door.”

Originally published as Home loan surge: 5 per cent home deposits spark buying frenzy