All first-home buyers will be eligible to put down a 5% deposit on a property from 1 October, lower than the usual down payment of 20%.
The maximum price of properties available to buy with the scheme will be limiteddepending on the city or region. The Government will also coverlenders’ mortgage insurance.
Labor planned to expand the scheme from 2026, but has brought it forward, describing the move as a “game changer” for aspiring home owners.
However,independent housing experts and the Opposition have argued it should be more targeted.
The scheme
The lower deposit scheme was first set up in 2020 to allow first home owners to get a property with a 5% deposit.
Banks usually ask for a 20% up-front deposit for a home purchase.
The scheme is currently capped at a certain number of places annually. In 2024/25, it was limited to 50,000 new entrants to the property market.
The scheme also currently has income caps — $125,000 for individuals and $200,000 for couples.
Changes
In April, Labor announced it would expand the current scheme to all first-home buyers from 2026 if it won the May election.
Today, it announced the scheme will come into effect from 1 October.
This means there will no longer be income tests or limited places for first home owners.
The change won’t require legislation, meaning the Government doesn’t need to rely on broader political support to pass the measure through Parliament.
There will continue to be limits on the value of properties first home-buyers can purchase with a 5% deposit. However, the new limits will be higher than existing caps.
For example, a Sydney or Newcastle home will be capped at $1.5 million for those on the scheme. Currently, it’s $900,000.
Regional Western Australia homes will be capped at $600,000, up from the existing limit of $400,000.
The latest data from the Australian Bureau of Statistics (ABS) shows the average property price in Australia has recently climbed above $1 million.
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Insurance
Banks and lenders usually require buyers who don’t have a 20% deposit to pay for Lender’s Mortgage Insurance.
This is a safety net for a bank providing a mortgage (loan), in case the buyer struggles to pay off their home loan in the future or sells their property at a lower value than when it was purchased.
While the bank takes out the insurance policy, it requires the buyer to pay the insurance bill, which can run to tens of thousands of dollars.
The Government will become a ‘guarantor’ for the lenders’ insurance, meaning a new home owner won’t have to pay for it.
Housing Minister Clare O’Neil said the Government wants to ensure more renters own a home.
“It’s just not right that an entire generation of young Australians have been locked out of the housing market — saving for decades while paying off someone else’s mortgage,” O’Neil said.
She said it could help people who are saving for a home deposit buy a house “seven or eight years” earlier.
Coalition
Shadow Housing Minister Senator Andrew Bragg said the scheme will “help on the margins”.
However, he cautioned against the “uncapped” income limits, saying it’s opened the scheme up to “the children of billionaires”.
“The taxpayer is under-writing mortgage insurance schemes for extremely wealthy people,” Bragg told the ABC.
He called the housing crisis “a supply side challenge”.
Expert view
Housing expert and author Peter Mares told TDA he’s concerned about opening up the scheme to those “who don’t need it”.
He also urged anyone applying for lower deposits to “stress test” their personal circumstances, such as relationship breakdowns, having children, interest rate rises, and job losses.
“ Instead of buying with a 20% deposit and an 80% mortgage, they’re now buying with a 5% deposit and a 95% mortgage. So there is a higher risk here of people getting into financial trouble,” Mares said.
