First home buyers in Australia have not yet returned in numbers to the property market despite some growth in the last few months, according to a financial comparison site.

RateCity found that nearly 60,000 fewer first home buyers entered the mortgage market in the 12 months to May 2011 compared to the 12 months to May 2010, based on new figures by the Australian Bureau of Statistics (ABS) released on Monday (July 11, 2011).

Damian Smith, RateCity’s CEO, said first home buyers remain nervous about taking the plunge on property and as a result the number of those taking up mortgages in the last 12 months has plummeted.

“These numbers tell us that there are 5,000 fewer mortgages every month being taken out by first home buyers compared to 12 months ago. There are around 7,500 first home buyers per month taking out mortgages – so a drop of 5,000 per month is a significant change.

Mr Smith said the likely causes were interest rate increases, and to some extent the fact that purchases were “brought forward” into 2009/10 because of the First Home Owners Boost.

RateCity found first home buyers’ decision to move away from the property market wasn’t based on rising property prices. Home values were mostly unchanged in the 12 months to April 2011, according to RP Data. National city median property values averaged $468,000 in April, the same figure in April 2010.

Interest rates, however, weighed more heavily on first home buyers’ decisions to purchase property in 2011, according to Mr Smith.

“We’ve seen seven interest rate rises since the beginning of October 2009, which lifted the cash rate from 3.00 percent to 4.75 percent, which has negatively impacted consumer confidence.

For a typical first home buyer needing to borrow around $281,700, this increase in interest rates means additional monthly repayments of $281, or $3,372 per year.

“Despite the Reserve Bank boards’ decision to keep rates steady for the past seven meetings, it’s clear that prospective buyers are still wary about jumping into debt because their monthly repayments are going to be much, much higher than they were in late 2009,” said Mr Smith.

First home buyers behaved similarly around the nation, with prospective buyers in most of the states and territories shying away from debt, taking out fewer loans of smaller value on average in 2011.

Mr Smith said more could be done to encourage Australians to save for a first home beyond the use of government grants.