How rising costs are affecting first home buyers
Higher interest rates and ongoing inflation are putting pressure on many first home buyers, especially those entering the market with a 5 percent deposit. In the video, Sean explains why these conditions are creating challenges and what buyers can do to stay in control.
The impact of rising rates on first home buyers
In the reel, Sean highlights that rising living costs and higher repayments are making it harder for some buyers to maintain their borrowing capacity. For those using the 5 percent deposit scheme, even small increases in rates can have a noticeable impact on affordability.
Why the 5 percent deposit scheme is feeling the pressure
Cashflow implications
The scheme remains a valuable pathway into the market, but it works best when buyers have strong cash flow and stable spending habits. With inflation increasing day to day expenses, some buyers are finding it harder to demonstrate the consistency lenders want to see.
The impact of inflation
Inflation reduces the amount of surplus income available each month. Lenders assess this closely, and higher living costs can reduce the maximum loan amount available. Buyers who are already close to their borrowing limit may feel this more sharply.
The impact of interest rises
A 5 percent deposit means a larger loan size, which makes repayment increases more noticeable. Even a small rate rise can change weekly repayments enough to affect serviceability. This is why lenders are applying more conservative buffers in 2026.
What buyers can do to stay prepared
Strong budgeting, clear spending patterns and consistent savings remain the most effective ways to protect borrowing capacity. Reviewing your budget early and understanding how rate changes affect your position can make a significant difference.
Need help understanding your borrowing capacity?
If you are preparing to buy your first home, understanding your borrowing capacity is one of the most important steps. We help you review your budget, understand what lenders look for and build a plan that supports your borrowing capacity. There is no pressure, no obligation and no cost to you because the lender pays the fee once your loan settles.
1. How are rising interest rates affecting first home buyers?
Higher rates increase repayments, which can reduce borrowing capacity and make serviceability tighter.
2. Why is inflation impacting home loan applications?
Inflation increases day to day expenses, leaving less surplus income for lenders to assess.
3. Is the 5 percent deposit scheme still viable?
Yes. It remains a strong option, but buyers need clear spending habits and stable cash flow.
4. Can budgeting improve borrowing capacity?
Yes. Predictable spending and consistent savings help strengthen an application.
5. Does it cost anything to get home loan advice?
No. The lender pays the fee once your loan settles.
Download your free first home buyer guide
Buying your first home is exciting but can feel overwhelming. This guide breaks the process into clear, practical steps so you can move forward with confidence. With the right preparation, your first home is closer than you think.
