To reach that first rung on the property ladder, first home buyers have had to face a number of challenges, the most important one, being able to obtain a mortgage in the first place.

Chief economist, Tim Reardon for the Housing Industry Association (HIA) says servicing a mortgage isn't the issue, it is firstly being able to save for a deposit and then meeting the increasingly stringent requirements of lenders.

“The tightening regulatory environment that the banking sector has faced over the last decade has forced lenders to eliminate much of the flexibility in the mortgage market that made home ownership accessible for first home buyers," said Mr Reardon.

“Even through the GFC and the recent house price correction, mortgage arrears in Australia remained the envy of financial regulators worldwide. 

“Structural changes to the banking sector over the last decade are working against first home buyers. 

Even if a first home buyer has sufficient income to meet loan serviceability requirements, they typically borrow a high proportion of the property value - and borrow closer to their capacity – which means they are considered a higher risk.

Mr Reardon said this was having the effect of forcing first home buyers to save for a deposit greater than 10 per cent.

“In 2009, lending to home buyers with a deposit of less than a 10 per cent of the property value exceeded 20 per cent of new lending," said Mr Reardon.

"Now it accounts for just 7 per cent of new loans. 

“Reducing risk of lending to first home buyers comes at a cost and that is the decline in home ownership."

Joust (joust.com.au) is Australia's only "real-time" home loan auction market-place and managing director Mark Bevan says enquiry levels from first home buyers with less than 20% deposit is strong. 

"On the supply side, the majority of our lenders have low appetite for loan applications with a loan to valuation ratio of more than 80%," said Mr Bevan to WILLIAMS MEDIA.   

"Competition amongst lenders is strongest for large loan amounts for high value properties where the loan to valuation ratio is less than 60%. 

"The Banks are keen to have First Home Buyers as customers but tighter regulation around loan servicing and loans with loan to valuation ratios above 80% is resulting in low levels of competition and higher interest rates in this space. 

"Certainly, the larger the deposit a first home buyer has - the more competition there will be for that new home loan."

The HIA Housing Affordability Index for Sydney declined by 4.0 per cent in the December 2019 quarter, and the index for Melbourne recorded a 3.3 per cent decline.

More modest declines were recorded in the indexes for both Hobart and Canberra, with declines of 2.1 and 1.9 per cent respectively.

The indexes for Brisbane and Adelaide were essentially unchanged during the quarter, while the indexes for Perth and Darwin showed increases of 2.1 and 2.0 per cent, respectively. 

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