First Home Buyers Able to Access 5 Percent House Deposit Scheme Sooner

The plan to go guarantor on 15 percent of new home buyers’ deposits is not without critique.

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The Australian government is set to bring forward a scheme for all first home buyers to purchase a home with a five percent deposit.

The government will act as guarantor for the remaining 15 percent of a 20 percent deposit.

Originally slated for January 2026, the scheme has now been moved forward to October 2025.

The move will mean new buyers will not have to pay lenders’ mortgage insurance (LMI), which currently exists on low-deposit loans (usually less than 20 percent) and typically costs 1–5 percent of the purchase price.

“Labor will enable every Australian to buy their first home with a five percent deposit,” Prime Minister Anthony Albanese said in a statement.

During the election campaign, Labor expanded the scheme, removing caps on income and increasing property price limits.

“The median home price in Australia today is $820,000. Five percent of that is $41,000. The last time $41,000 covered the 20 percent deposit for a median home was 2002.

“That’s the generational scale of this change.”

Under the new scheme, someone buying a million-dollar apartment in Sydney would need a $50,000 deposit, while the deposit on a $850,000 home would be $42,500.

Albanese said his government was also spending $10 billion on partnering with state developers to build 100,000 homes exclusively for first home buyers.

Caution Urged

The Property Council of Australia said the scheme would be helpful to new buyers, but issued caution due to the possibility of demand driving property prices up.

“I cannot emphasise strongly enough, scheme design will need to be carefully reviewed on a regular basis from 1 July 2026 to ensure key housing markets do not overheat,” CEO Mike Zorbas told AAP.

The Insurance Council of Australia has long been critical of the government’s policy.

Earlier in the year, the group said the effective nationalisation of LMI for first home buyers on the scheme would reduce the pool of LMI customers to the point where the market could become unviable—making it harder for buyers to access finance if they’re not part of the government’s scheme.

LMI is a one-off insurance payment that protects lenders in case a borrower defaults on their home loan.

“By subsidising all first homebuyers, including those with a good income and savings in the bank, the purpose of the First Home Guarantee scheme is lost and a functioning private market may be severely and irreversibly impacted,” CEO Andrew Hall said.

The group said the scheme would have been better directed at those who needed it most, such as single parents, essential workers and people in regional areas, rather than being made available to all first home buyers.