The Federal Government’s expanded 5% Deposit Scheme has recorded substantial demand, with more than 100,000 buyers taking advantage of the program since its expansion a year ago. The figures demonstrate how important deposit assistance has become for first home buyers, although industry commentary suggests saving a deposit is only one part of the affordability challenge facing purchasers.
A total of 102,594 buyers have signed up to participate since the scheme was expanded to help all first home buyers. The scale of participation means half of all first home buyers nationally are now using a first home buyer scheme to assist with purchasing their first property. For eligible households, one of the major financial benefits is the ability to avoid thousands of dollars in Lenders Mortgage Insurance, commonly known as LMI.
LMI can represent a significant additional cost for buyers purchasing with a smaller deposit because it protects the lender rather than the borrower. By enabling eligible first home buyers to purchase with a 5% deposit without paying that insurance cost, the government scheme can reduce the amount of cash required before entering the market.
The performance of borrowers already using the program also provides an important measure of how participants are managing their loans. Of those who have completed their purchase, 99% are either ahead of their repayment schedule or on track. That result suggests the overwhelming majority of participants are currently meeting their mortgage obligations despite entering home ownership with a relatively small initial deposit.
Victoria recorded the highest number of buyers signing up during the past 12 months, with 33,413 participants. New South Wales followed with 28,158, while Queensland recorded 20,125. The figures reflect strong demand for assistance across the three largest eastern-state housing markets, where accumulating a traditional 20% deposit can be particularly difficult as property values rise.
The latest wave of participants has pushed total use of the scheme considerably higher. Since its inception, more than 280,000 first home buyers have accessed the program. That cumulative figure demonstrates how government-backed deposit assistance has become an established feature of the first home buyer market rather than a niche pathway.
Reducing the deposit hurdle can change the timing of a purchase. A buyer who can comfortably service a mortgage may otherwise spend several additional years trying to accumulate a larger deposit while also paying rent. During that period, property prices can move and personal circumstances can change. A lower deposit requirement can therefore allow some households to purchase earlier.
However, deposit assistance does not solve every affordability problem. Aussie representative Samantha Harvey says the scheme can help buyers who are financially ready to purchase with a smaller deposit, but it does not improve their borrowing capacity. That distinction is increasingly important when lenders assess income, existing debts, household expenses and the ability to service a mortgage.
Harvey says she is seeing greater interest in the Help to Buy Scheme as well as more first home buyers exploring joint purchases with family members. In her assessment, the deposit barrier may be becoming easier for some purchasers to overcome, while borrowing capacity is emerging as the more significant constraint.
That difference can be particularly relevant in expensive housing markets. A buyer may successfully save 5% of the price of a suitable property but still be unable to borrow the remaining amount. Assistance with the deposit does not automatically change how much a bank is prepared to lend, meaning the purchaser may still need to adjust their location, dwelling type or overall budget.
Joint purchasing with family can provide another pathway, although it introduces its own financial and legal considerations. Similarly, the Help to Buy Scheme may appeal to households whose challenge extends beyond accumulating a deposit. The increasing interest in different forms of assistance demonstrates that first home buyer affordability is not a single problem with one solution.
Buyers also need to consider the implications of purchasing with a smaller equity position. A 5% deposit provides less initial protection against a decline in property value than a larger deposit. Careful budgeting for repayments, ownership costs and unexpected expenses therefore remains important even when the upfront barrier is reduced.
The 99% repayment figure is encouraging in that context, showing that almost all existing participants are currently ahead of schedule or on track. It indicates that a small deposit does not necessarily mean borrowers will struggle with repayments when eligibility and lending assessments are appropriately applied.
Ultimately, the strong take-up of the expanded scheme shows there is substantial demand for measures that shorten the path into home ownership. With 102,594 buyers signing up in the past year and more than 280,000 accessing the scheme since inception, deposit assistance is now influencing a significant portion of the first home buyer market.
The next challenge for many households may increasingly be not saving the deposit, but securing enough borrowing capacity to purchase an appropriate property.
