The Albanese Government launched its expanded 5% deposit scheme yesterday, making every first home buyer eligible to purchase with a small deposit, avoid Lenders Mortgage Insurance, and borrow up to 95% of the property purchase price. There are no income caps, no limits on places, and price caps have been lifted to align with the average house price.
Prime Minister Anthony Albanese said, “We’re making it easier for young people and first home buyers to achieve the dream of owning a home. From today, the 5 per cent deposit scheme will be available for all first home buyers, meaning more Australians can get into their own home sooner. This change will open the door to thousands more buyers, helping them save money and get their keys faster.”
The housing market Australia-wide is already running hot, and Perth is no exception. REIWA’s latest snapshot has the metro median house price at $810,000 as of data updated on October 1st. It also shows that the number of new listings is the lowest it has been in a long time — 2,301 in September — and the median days to sell are just nine.
The government’s logic behind the policy is straightforward: reduce the burden of a large deposit and eliminate thousands of dollars in Lenders Mortgage Insurance premiums. It argues the scheme will cut years off the time it takes to save a deposit and save tens of thousands of dollars on Lenders Mortgage Insurance. In just the first year alone, first home buyers using the scheme are expected to avoid around $1.5 billion in potential mortgage insurance costs.
Critics are already warning that the policy will inflate prices by increasing demand without addressing supply — a valid concern in a city where listings remain scarce and prices continue to rise.
What do the changes mean in reality?
The scheme works by guaranteeing a portion of a buyer’s home loan, allowing a purchase with a 5% deposit and no Lenders Mortgage Insurance. Eligibility is broad: every first home buyer can apply, with unlimited places, no income caps, and higher property price caps. In WA’s metro area, the cap is now $850,000.
At a median Perth-metro house price of $810,000, a 5% deposit is $40,500, leaving a loan of $769,500. On a 30-year term at current variable rates, the monthly repayment would be $4,413. In theory, this will mean that more first-time homebuyers will have an opportunity to enter the housing market — previously, they would need to save a six-figure deposit, which, for most people, coupled with the current cost of living, is seen as nearly impossible.
In practice, when you increase the pool of buyers overnight, you don’t just change who can buy; you also change the price they have to pay.
Who will benefit from this?
Current property owners
Obviously, anyone who currently owns property will benefit from this policy. Increased demand generally means higher prices. In a market already short on stock, an expanded cohort of eligible buyers is likely to add upward pressure to housing prices in the near term.
First home buyers
For first-time home buyers, this is undeniably a shorter path to owning a home. You no longer need to scrape together $100,000-plus, and you dodge Lenders Mortgage Insurance. But you are also taking on a much larger loan and entering bidding wars in a market with information asymmetry, where many successful offers are already well above the listing price. The policy may help you jump the deposit hurdle; it doesn’t lower the bar for purchase price or repayments.
The banks
Bigger mortgages. More loans written. The government reducing risk. The banks are going to make, well, bank.
Australia’s majors hardly need the help — they were already posting record profits — but this turns the tap up a little more. The government says it will push Housing Australia to highlight smaller, customer-owned, and regional lenders to diversify access, which is welcome, but competition policy this is not.
Is this a good Government policy?
It’s neither good nor bad. The policy is a functional, targeted fix to a specific problem: the deposit and Lenders Mortgage Insurance cliff that has locked out a generation of buyers. On the other hand, it serves as a demand-side accelerant in a market with constrained supply, planning bottlenecks, and insufficient construction capacity.
The blunt truth is that affordability is not restored through policies such as this one. If the government wants to bend the curve on price-to-income ratios, it needs to create a market where supply exceeds demand and maintain this balance for several years. At the moment, that appears to be quite unlikely.
