The five per cent deposit scheme is once again in the spotlight after Prime Minister Anthony Albanese announced that its expansion will be brought forward.
While this move is being promoted as a way to help more Australians purchase their first home, experts are warning that the scheme carries risks that should not be ignored.
What is the Five Per Cent Deposit Scheme?
The five per cent deposit scheme is designed to make home ownership more accessible. It allows first home buyers to enter the market with only a 5 percent deposit, while the government guarantees the remaining 15 percent needed to avoid lenders mortgage insurance.
This significantly lowers the upfront cost of buying a home and speeds up the process of getting into the market.
Originally limited by income thresholds, participant caps and property price limits, the scheme has now been expanded to include more buyers and higher property values, giving thousands of Australians a chance to secure their first home sooner.
Government Push for Fast Tracking
Anthony Albanese recently met with a Canberra couple who had purchased their property through the scheme.
From their front lawn, he announced that his government is determined to fast track home ownership opportunities. The expansion of the five per cent deposit scheme was expected later but has now been brought forward as part of the government’s wider housing plan.
Industry Warnings on High Risk Borrowing
While the scheme sounds appealing, property experts and comparison firms have sounded a note of caution.
Aaron Scott, co founder of bRight Agent, explained that a buyer who uses the five per cent deposit scheme is effectively taking on a 95 percent mortgage.
This means the buyer only owns 5 percent of the property’s equity, leaving them in a vulnerable position if market conditions change.
Scott also pointed out that homeowners with such small equity often struggle to refinance or secure lower interest rates. The early years of a mortgage are the hardest for paying down the loan, and having such a high debt level can lock borrowers into less favourable terms.
Could It Drive Up Prices?
Economists have also questioned whether expanding the five per cent deposit scheme will actually make housing more affordable.
With more buyers able to enter the market quickly, demand could outstrip supply, pushing property prices higher. This would make it even harder for future buyers to save for a deposit, creating a cycle of rising prices and higher debt levels.
Balancing Benefits and Risks
The five per cent deposit scheme does offer clear benefits. It lowers the barrier for first home buyers, removes the cost of lenders mortgage insurance, and provides an earlier pathway into ownership.
For many households, this can be the difference between renting for years or stepping onto the property ladder.
At the same time, the risks are significant. Buyers take on large debts with minimal equity, they may find it harder to refinance, and they remain exposed if property values fall. Without matching increases in housing supply, the scheme could also place more pressure on already high property prices.
