More than half the mortgages approved to first home buyers in January were low equity loans, setting a new record for that type of higher risk lending.
The latest figures from the Reserve Bank show 51.8% of the mortgages approved for first home buyers in January were low equity loans, where the borrower has less than a 20% deposit.
That was the first time low equity lending to first home buyers has passed the 50% mark in the Reserve Bank's data series which dates back to 2014, meaning it's likely an all time high.
This type of higher risk lending to first home buyers has increased rapidly over the last two years, with low equity loans making up just 40.9% of approvals to first home buyers in January last year and 31.3% in January 2024. See the graph below for the trend over the last 10 years.
Low equity loans carry higher risks for both borrowers and lenders, giving them less room to restructure the loan if the borrower suffers a financial setback such as a loss of income.
Size of loans up too
The higher level of low equity lending was not the only record set by first home buyers in January.
The average size of the mortgages approved to first home buyers hit a record high of $599,437 in January, pushed up by the volume and value of low equity loans.
The average size of low equity loans approved to first home buyers in January was $656,148, compared to an average loan size of $539,720 for first home buyers with at least a 20% deposit.
Ironically, the increase in higher risk lending does not appear to have led to a increase in the total number of aspiring first home buyers getting into a home of their own.
The total number of mortgages approved to first home buyers in January this year was 1775, down slightly (-2.3%) from 1817 in January last year.
However, while fewer loans were approved, the total value of loans approved to first home buyers increased slightly, to $1.064b in January 2026 from $1.036 billion in January 2025, up 2.7%.
So it appears that while fewer mortgages were approved to first home buyers in January compared to a year earlier, banks were able to increase the total amount of their lending inro the first home buyer market by increasing the amount of higher risk lending.
2 Comments
Owner occupiers and investors are taking a larger slice of the cake
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That doesn't appear to be the case Cote. FHB's accounted for 35.2% of all the mortgages approved for the purpose of purchasing a property in January this year, up from 32.7% in January last year. It was a slow but steady increase over that 12 month period. So if owner-occupiers and investors are taking a bigger share of the mortgage pie, it's probably because they are taking on more debt rather than buying more properties.
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