Government homebuyer scheme ‘washed out’ as rate hikes hit home

Australia’s federal government scheme to support first-home buyers has failed within seven months of implementation, with rising interest rates undermining its impact. Data from credit firm Equifax shows first-home buyer loan demand dropped 9.2% year-over-year in May 2026, driven by the Reserve Bank of Australia’s three rate hikes. Queensland and Victoria led the decline, with demand falling 16.2% and 15.3% respectively, while Millennials (26-35) saw a 16.3% drop in loan applications. The government expanded its 5% deposit scheme in October 2025, guaranteeing loans up to 95% of a home’s value under state-specific price caps. However, the scheme’s rollout coincided with rising mortgage rates, which experts say has halted progress toward the ‘Great Australian Dream.’ Equifax’s Moses Samaha noted the decline reflects thousands of potential buyers pausing their plans, describing the trend as ‘quite a concerning outlook.’ The decline extends broader mortgage trends, with Australia seeing nearly 10,000 fewer loans signed in the March quarter compared to late 2025, per Australian Bureau of Statistics data. While global uncertainty and cost-of-living pressures may have contributed, the April rate hike was likely the decisive factor. Analysts predict demand may not recover until 2027, despite the RBA’s expected pause in June. The scheme’s failure highlights the challenges of balancing inflation control with housing affordability. Millennials, the primary beneficiaries, now face higher borrowing costs, pushing homeownership further out of reach for many. The data suggests the government’s intervention may have been insufficient to offset rising interest rates and economic pressures.