Getting into the housing market may seem like a challenge, but first-time buyers have plenty of reasons to stay optimistic.

With a spate of interest rate rises and nationwide hikes in housing prices over the past couple of years, first home buyers may be left wondering whether they can even afford to enter the property market.But, they very well can.  

Two experts share their insights into the current landscape for first home buyers and how they can better navigate it.

The current landscape for first home buyers

Mortgage Choice broker Josh Almond says the traditional notion of a first home buyer has changed from previous generations.

Today, they’re now in their late 20s or 30s, they have some savings behind them but are generally finding it difficult to save.

Plus, they’re spending more on their first home. Mortgage repayments can be as much as double their rental payments, meaning a bigger financial jump from renting to homeownership. This has impacted the ability of many first homeowners’ to borrow. In fact, PropTrack data suggests that first home buyers can borrow 30% less than they could just two years ago.

The reduction in borrowing capacity is making many home buyers think quite differently about what they can afford and where they can buy. But, there is a silver lining. New loan commitments to first home buyers fell 6.9% in January 2023 but after climbing steadily in the back half of 2023, they’re up by 4.4% year on year, according to the latest ABS data.

How first home buyers can soften these pressures

Despite affordability challenges, Josh Almond and Wei Ma, NAB Home Lending Executive Banker, say there are several possible tactics for first home buyers.

Josh Almond says first home buyers should think about what buying a property means to them and prioritise accordingly. Doing so may help them weather any challenges that come their way.

“How much do you really want a property?” he asks.

“Make it a priority and then commit to reaching your goals.”

Live within your means

While it might seem tempting to splash out, Mr Almond says it’s crucial to live within your means.

He suggests not taking on more debt when you’re looking to buy, budgeting and being conscious about your financial choices, and getting comfortable with the house price and future repayments you can afford.

As far as interest rates go, it’s important to be prepared for future fluctuations.

Manage debts

Your debts can have a huge impact on your borrowing capacity because lenders will see you’ve got other financial commitments that could affect your mortgage repayments. Gauge how your current debts impact your borrowing power, looking at everything from student loans to payment plans.

“Loans, credit cards and 'buy now pay later' schemes all have an impact on how much you can borrow,” Mr Almond says.

Look into government initiatives

On the topic of government programs, Ms Ma, NAB Home Loan Executive banker points to two that may be of interest to first home buyers with a smaller deposit.

One is the First Home Guarantee (FHBG), an Australian government initiative aimed at first home buyers and those who haven’t owned property in the last 10 years.

Under the scheme, eligible buyers can purchase a new or existing home with a deposit as little as 5% and the government will guarantee up to 15% of the loan^.

It helps buyers with a low deposit avoid the cost of Lenders Mortgage Insurance.

It must be a property they intend to live in and not an investment. The other is the Regional First Home Buyer Guarantee (RFHBG), which has many of the same conditions but buyers need to have lived in the regional area where they’re purchasing (or an adjacent area) for 12 months prior^.

“Not all banks offer government schemes for first home buyers, so if it’s something you’re looking into to help you purchase your first home, reach out to NAB,” Ms Ma says.

“We’ll check your eligibility, help you understand the benefits and restrictions of the scheme in your specific circumstances and States, and will help you to prepare for buying your first property, from assisting with a savings plan to helping you secure pre-approval.”

Engage professionals and get pre-approval

Getting professional support can make all the difference to your home-buying journey, such as a mortgage broker or expert home loan banker  who can find the best loan options for you. Mr Almond says you should engage the professionals well ahead of time.

“Engage an expert 6-12 months in advance of looking so you can figure out what you can borrow, which will have a knock-on effect on what you can buy and where,” he says.

Similarly, having pre-approval in advance can make the home-buying process much easier because, according to Ms Ma, “it will help you understand your borrowing capacity and also shows sellers that you’re a serious buyer”.

Stay informed

Knowledge is power, so keeping yourself abreast of everything property will help you navigate the process more effectively.

“Stay informed and connected to your banker,” Ms Ma says.

“Conduct your own market research, keep an eye on property trends and follow interest rate changes. Stay updated on the existing and new government programs for first-time buyers too.”