The Great First Home Buyer Squeeze: What’s Driving Their Decisions in 2025?

Despite the affordability crisis, rising interest rates, and intense competition, first home buyers are still diving into the Australian property market in droves.

But they’re not doing so because they feel ready, they’re doing it because they’re scared not to.

The Finder First Home Buyer Report 2025 reveals a worrying mix of emotional urgency, financial stress, and structural challenges facing buyers today.

And while the government is stepping in with schemes to ease the pain, the underlying system remains brutally difficult to navigate, especially for those without family support.

Let’s dig into what’s happening on the ground and where the opportunities are for buyers willing to think a little differently.

FOMO is fueling the market more than fundamentals

We’ve always known that emotion plays a role in real estate.

But what we’re seeing now goes beyond the usual enthusiasm and excitement.

The dominant emotion today is fear, specifically, fear of missing out.

According to the report:

• 38% of first home buyers in 2025 said they were buying now because they were worried prices would keep rising. That’s up significantly from 31% in 2022.

• 61% had already missed out on a property they were seriously considering — most often because they were outbid or another buyer made an unconditional offer.

This competitive pressure is pushing buyers to make quick decisions, often before they’re financially ready.

The deposit dilemma: buyers are cutting corners

Saving for a deposit remains the single biggest barrier to homeownership.

And understandably, most buyers are no longer waiting for the magic 20 per cent.

In fact, data from Finder shows that:

• 70% of first home buyers are purchasing with less than a 20% deposit, a clear indicator they’re prioritising speed over stability.

• The majority are opting for 6–10% deposits, which exposes them to higher interest rates and Lender’s Mortgage Insurance (LMI) — an extra cost of up to $30,000 according to Finder’s estimate.

 

The logic here is simple: buyers believe that if they wait another few years to save a bigger deposit, property prices will have run away from them anyway.

Finder’s modelling backs this up: it takes about 4 years to save a 5% deposit, but a whopping 14 years for a 20% deposit.

But buying early comes at a cost, and not just in the form of LMI.

Stretching budgets, shrinking buffers

The emotional urgency to buy is forcing many first home buyers into risky territory:

• 47% of buyers in 2025 paid over their budget, up from 38% in 2022.

• 65% will spend more than 30% of their income on mortgage repayments, which is the technical definition of mortgage stress.

• 14% of buyers have no savings left at all, and 33% have less than $10,000 in the bank after their purchase.

This lack of a financial buffer is a significant danger.

One surprise cost, a broken water heater, a job loss, or an interest rate bump, could send these households into financial hardship.

This table from Finder is  particularly revealing:

Spending $50,000 over budget raises annual mortgage repayments by nearly $3,600.

That’s not just a number, that’s the family holiday, the emergency savings, or the kids’ tuition.

Regret is common, especially at auctions

When you combine emotional decision-making, tight finances, and high pressure, it’s no wonder that 45% of first home buyers now regret their purchase, according to Finder's data.

Top regrets include:

• Paying too much for the property (26%)

• Not saving a large enough deposit (11%)

• Buying in the wrong area (10%)

Notably, 77% of buyers who bought at auction regretted their purchase, compared to only 37% who bought off-market or through private treaty.

That tells you something about the pressure-cooker environment that auctions can create.

Searching smarter: ditching the Big 4 and moving further afield

Despite all this, first home buyers are getting savvier in their strategies.

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Finder's report shows that:

• One in three buyers didn’t use their regular bank for their home loan. While 72% bank with a Big Four, only 61% borrowed from one, suggesting many are shopping around for better deals.

• Almost 25% are searching for homes in a different region or state. With the median house price in capital cities sitting 48% higher than in the regions, it’s not surprising buyers are looking further afield.

Even within states, people are looking to regional towns where the price-to-income ratio is more manageable.

It’s not just affordability that drives this;  lifestyle changes, remote work, and a desire to get more for your money are playing a role too.

The growing role of Government support

The report also shows that the vast majority of first home buyers in 2025, 78% to be exact, are either using or plan to use a government support scheme.

Here’s a snapshot of the most popular ones:

• First Home Owner Grant (FHOG): Up to $15,000 depending on state.

• First Home Guarantee (FHBG): Avoids LMI and lowers deposit requirements.

• Super Saver Scheme (FHSS): Allows you to use pre-tax super contributions to save for a deposit.

• Help to Buy Scheme: A shared equity model where the government co-buys up to 20% of your property.

Used wisely, these programs can offer a serious leg-up, slashing deposit requirements, avoiding LMI, and even reducing monthly repayments.

But they’re not a silver bullet.

Many buyers still need additional education to use them effectively and avoid pitfalls.

The family factor: Bank of Mum and Dad still growing

Parental assistance is more common and more impactful than ever, according to the report:

• 17% of buyers received money from their parents, up from 11% in 2022.

• Buyers with family help are two years younger on average when they enter the market.

• They also have 41% more savings left over post-purchase compared to buyers who go it alone.

That time advantage can translate into profound financial benefits.

For example, entering the Perth market just two years earlier would have saved a buyer around $220,000, based on median price growth.

But this raises a broader issue: what happens to those without access to family wealth?

The gap is widening, and our policies need to address this divide.

So, what should First Home Buyers do differently?

If I were sitting across the table from a first home buyer today, here’s the advice I’d give them:

1. Plan first, buy later.
Yes, property prices are rising, but that doesn’t mean you should rush into a decision.

Clarify your long-term financial goals and only buy when you can do so without gutting your savings or overcommitting on repayments.

2. Think creatively.
Can you buy with a sibling or a trusted friend? Rentvest? Start with a unit instead of a house? Move further out, or interstate?

There are more pathways than ever, but they require clear thinking and good advice.

3. Use schemes strategically.
Government support can work, but only if you understand the trade-offs.

Don’t jump into a scheme just because it sounds attractive.

Work with an experienced finance strategist to analyse the numbers.

4. Buffer, buffer, buffer.
Even if it means borrowing less or waiting a bit longer, having a financial buffer is non-negotiable.

Homeownership should give you security, not anxiety.

Final word

Despite all the stress, there may be some good news ahead.

With two rate cuts already delivered in 2025, and more on the way, borrowing power is likely to increase, and repayments could become more manageable.

This may not solve the long-term structural affordability issues, but it will give buyers some breathing room in the short term.

Ultimately, homeownership remains a powerful and worthwhile goal.

But in today’s market, it’s no longer enough to simply save and buy, you need a plan, a strategy, and the discipline to execute it.