More first-home buyers are entering the property market with smaller deposits as the expanded Federal Government 5% Deposit Scheme reduces one of the biggest obstacles facing prospective homeowners. The program is helping eligible households purchase sooner, although buyers still need to carefully consider the consequences of taking on a larger mortgage with less starting equity.
Around 120,000 first-home buyer households took out a mortgage during the 2026 financial year. The proportion using the government scheme increased substantially following its expansion, rising from approximately 25% beforehand to about 50% afterwards.
That change demonstrates the importance of the deposit hurdle in the first-home buyer market. For many households, the challenge is not necessarily meeting mortgage repayments once they purchase. It is accumulating a sufficiently large deposit while simultaneously paying rent and managing everyday living costs.
Traditionally, buyers have aimed for a 20% deposit to avoid lenders mortgage insurance and reduce the amount they need to borrow. Reaching that target can take an average-income household around six years, during which time property prices, rents and personal circumstances can all change.
The expanded 5% Deposit Scheme is designed to shorten that process. Eligible first-home buyers can purchase with a deposit of as little as 5% without paying lenders mortgage insurance. Removing that additional cost can make purchasing significantly more achievable for households that have adequate income to service a mortgage but have struggled to accumulate a traditional deposit.
Changes to the program have also broadened access. Property price caps have been increased, income limits removed and place quotas eliminated. These adjustments mean the scheme can apply to a larger group of first-home buyers and a wider range of properties than under its earlier settings.
Higher price caps are particularly relevant in markets where dwelling values have risen beyond the previous limits. A government assistance program provides limited benefit if the properties available to first-home buyers consistently sit above the maximum purchase price. Increasing those thresholds brings the scheme closer to current market conditions.
Removing income limits also changes who can participate. Households with reasonable incomes may still struggle to save a 20% deposit, particularly in expensive housing markets. The expanded eligibility recognises that income and accumulated savings are different measures of a buyer’s ability to enter the market.
The advantages nevertheless need to be weighed against the financial implications of purchasing with only 5% equity. A smaller deposit means the buyer needs to borrow a larger proportion of the property’s value. That generally results in higher repayments and more interest being paid over the life of the loan.
Starting with less equity can also leave buyers more exposed if property values decline soon after purchase. Someone buying with a 20% deposit has a larger financial buffer than a buyer beginning with 5%. That does not automatically make a low-deposit purchase unsuitable, but it increases the importance of choosing a property carefully and maintaining a long-term perspective.
Repayment capacity remains critical. Government support with the deposit does not protect a household from future interest rate changes, higher living expenses or unexpected changes to income. Buyers need to assess whether repayments remain manageable under less favourable conditions rather than basing their decision only on what they can afford today.
There can also be broader market consequences when more buyers receive assistance at the same time. Increasing purchasing capacity among first-home buyers can create additional competition for affordable properties, particularly in areas where supply is already limited.
That means buyers should resist the temptation to stretch their budget simply because the scheme allows them to purchase sooner. Eligibility establishes access to the program; it does not determine whether a particular property or mortgage represents a sensible financial decision.
First-home buyers should continue to consider location, property condition, ongoing ownership costs and likely future needs. Rates, insurance, maintenance and other expenses can add considerably to the cost of owning a home compared with the mortgage repayment alone.
The strongest use of the scheme is therefore likely to be among buyers who are already financially prepared but have been held back by the time required to accumulate a large deposit. For those households, reducing the deposit threshold can potentially bring home ownership forward by several years.
The increase from roughly 25% to approximately 50% of first-home buyer households using the scheme after its expansion suggests that demand for this type of support is substantial.
The program does not solve the wider housing affordability challenge, nor does it make every property affordable. What it does provide is a more accessible route into ownership for eligible buyers who can responsibly manage the larger loan that accompanies a smaller deposit.
