First-home owner activity is expected to plummet more than 40% this year amid rising interest rates, tight lending criteria and reduced government incentives.

A survey of 3000 Australians by BIS Shrapnel for QBE Lenders' Mortgage Insurance found that first-time buyers dropped from 42% of those looking to buy last August to 36% in February, following expiry of the government's boosted first-home owner grant in October, and a higher cash rate.

QBE LMI estimates that loans to first-home buyers will fall to 110,000 this year, down 42% from the 190,000 that were written last year.

The Australian