A surge in the number of first-time homebuyers should lift QBE’s lenders’ mortgage insurance (LMI) business.

The insurer’s annual housing outlook says lending to first-time buyers grew 74% in Sydney last year, and almost 30% across the rest of the country.

“First homebuyers have been surging back into the market, with lending to them at their highest level since 2010,” the report says.

“This is expected to continue for the next 12 months at least.

“Tighter lending standards for domestic investors and restrictions on international buyers are believed to be the primary drivers.”

Owner-occupiers make up 80% of QBE LMI’s business, and more than half of first-time homebuyers require LMI.

QBE LMI CEO Phil White says helping Australians achieve the dream of home ownership has been the business’ primary aim since formation in 1965.

“For us, there is a great opportunity to help first homebuyers over the next 12 months, and fulfil our core purpose,” he said.

The trend for LMI over the past few years has been downwards as major lenders have reduced volume. QBE LMI wrote about $480 million of premium in 2014, but this was down to $287 million last year.

However, Mr White is comfortable with the fluctuation.

“We’ve been here for 50 years, and lulls and growth are in the nature of the housing market.”

In terms of pricing, the outlook paints a mixed picture, with Sydney and Melbourne seeing a correction but other areas heading into strong growth. The report says over the next three years house prices are expected to rise in Adelaide by 12.4%, Brisbane by 11.3%, Canberra by 10.4%, Hobart by 7.9%, Darwin by 6% and Perth 5%.

However, it’s a different story in the previously overheated markets of Sydney and Melbourne.

In Sydney prices grew 84% between 2012 and last year before falling 7.6% this year. They are expected to fall a further 3.5% next year, bottom out in 2020 and rise 2.3% in 2021.

Melbourne prices increased 69% from 2012 to last year before falling 1.6% this year. They are expected to fall a further 4.2% next year before rising 0.6% in 2020 and 1.2% in 2021.

Read the full report here.