Never a better time in four years for first home buyers

Falling interest rates and house prices leading to better mortgage affordability is drawing first home buyers into the market in increasing numbers.

The latest REINZ data show prices in the lower quartile are down to $580,000 in May compared to $599,000 in April.

This is the affordable end of the market, usually dominated by first home buyers. Since national house prices peaked at $670,000 at the end of 2021, they have dropped 13.4% or $90,000.

At the same time mortgage interest rates have declined by about 2%, meaning substantial savings on monthly repayments.

Cotality chief property economist Kelvin Davidson says data show first home buyers are active, accounting for nearly 25% of all property purchases across the country between January and April 2025 — well above the long-term average of 21–22%.

And Reserve Bank figures show 44% of all first home buyers had less than a 20% deposit. Banks can lend up to 20% of their new lending to owner occupiers with less than a 20% deposit.

Davidson says first home buyers are seeing opportunities in a buyer’s market and can buy a quality property for less than they thought. “First home buyers are being successful.

“They have the monopoly on low-deposit lending allowances at banks and for a while about 75-80% of all low-deposit lending has been to first home buyers.

Some first home buyers might not be aware they don’t need a 20% deposit – and if they want to get into the market there is bank capacity for low deposit lending as the speed limits overall are not really being test, he says.

About 12% of the 20% speed limit is being lent at low deposit rates, but other tests are also involved in whether a first home buyer qualifies for a mortgage.

Most lenders have a low equity margin, although one bank has removed this and is now offering a standard rate and a discounted rate for borrowers with more than 20% equity.

Davidson says it is never easy being a first home buyer, but conditions are more in their favour than they might have been at other points in other property cycles.

“However, it’s not as though houses are cheap, but they are cheaper than they were – down 16.3% from their peak at the end of 2021.”

Cotality’s outlook for the rest of the year is for the market to tread water. Lower mortgage rates will be an upwards influence, but on the flipside, listings remain high, putting a lot of negotiating power in buyers’ hands, which means restraint on house prices.

Other constraints are the economy and labour market, which may not necessarily rebound quickly, and debt-to-income ratio limits for mortgage lending.