Government scheme poses hidden risks for the very homebuyers it’s meant to help
Joseph Daoud (pictured) has gone from one of the strongest advocates to one of the fiercest critics of the federal government’s 5% Deposit Guarantee.
As the founder of Sydney brokerage It’s Simple Finance, he has seen interest in the scheme ramp up since its October 2025 expansion, which removed income caps and significantly lifted price thresholds for eligible properties.
To put it bluntly, while the scheme may once have assisted low income first‑home buyers, “it has rewarded high income earners with bad savings patterns and left those with lower incomes in the dust”, says Daoud.
He sees two core design flaws in the expansion: the removal of income caps and the inflexibility baked into the structure of the loans.
Previously, the scheme was targeted at borrowers earning up to $125,000, a cohort Daoud believes genuinely needs help in bridging the deposit gap.
But “if you’re earning over $125,000, you should be able to save a 20% deposit and still live a prosperous life,” he says. “The scheme rewarded lower earners who could save 5%. They’ve thrown that in the bin.”
Under the October 2025 changes, maximum purchase prices were pushed up to as much as $1.5 million (for Sydney properties, where the previous price cap was just $900,000), allowing borrowers to take on far larger debts with minimal equity.
In Daoud’s view, pushing eligibility thresholds all the way up to $1.5 million “is not fair… It’s going to create a serious amount of financial stress.” He worries that the government’s interest in the property – which must be bought out before converting the property into a rental – is becoming an albatross around many first‑home buyers’ necks.
“You can refinance and make it an investment, but if the property hasn’t grown enough in value, then technically you can’t,” warns Daoud. He regularly gets calls from clients who bought under the 5% Deposit Guarantee and now want to refinance or turn their purchase into an investment property. “We can’t help them without lenders mortgage insurance (LMI). They’re stuck.”
Daoud still writes some loans that take advantage of the 5% Deposit Guarantee, but he often recommends alternatives that give buyers more flexibility if and when they want to rent the property out.
While he acknowledges the potential benefits, “what I am against is it not being adequately explained to individuals prior to them going and utilising it,” he says. “If they get stuck or if they’re in financial hardship, that’s where they’re really going to struggle. It doesn’t allow you the freedom that other mortgages or other potential loans do.”
Despite his criticisms, the scheme has proved immensely popular with first‑home buyers.
In the two months since its October expansion, the scheme had helped 21,000 Australians enter the property market. Since May 2022, it has helped more than 200,000 people into homeownership.
But the scheme’s negative effect on housing affordability is a mounting concern.
Cotality data shows that properties valued under the scheme’s new caps are outperforming others, suggesting that previously affordable homes are becoming ever further out of reach for younger buyers.
However, the jury is still out on how inflationary the scheme really is – only time and more data will tell.
In the meantime, housing affordability is being rocked by a persistent lack of supply, while the debate around unfair tax breaks for wealthy property investors – which are accused of skewing the market away from younger first-home buyers – is growing more heated.
Labor is facing pressure to reduce the capital gains tax (CGT) discount at the May Budget, with economists and even Commonwealth Bank chief executive Matt Comyn advocating for change. On the other hand, industry groups like the Housing Industry Association (HIA) warn that reducing the discount will negatively affect housebuilding rates at a time of supply bottlenecks.
Neither prime minister Anthony Albanese nor treasurer Jim Chalmers have officially stated that CGT changes are on the menu ahead of the May Budget.
Self‑employed borrowers need a leg up too
While much of the public debate focuses on getting first‑home buyers onto the property ladder, Daoud argues that self‑employed borrowers “are the ones that truly need the help more than anyone”.
Self‑employed borrowers are his bread and butter, comprising about 90% of It’s Simple Finance’s loan book. Having realised that self‑employed individuals often struggle harder than first‑home buyers to secure a mortgage, Daoud set out to build his business around them.
Too often, a straightforward deal “can quickly turn from a good experience into a bad experience” if they lack the right professional guidance from the outset, he says.
But for knowledgeable brokers, the self‑employed can be the best customers in the business. “The best thing about a lot of self‑employed clients is that they’re sticky,” says Daoud. “Once you do right by them the first time, they don’t want to shop around because they know the struggle that they’ve had in the past with other bankers or other brokers when it comes to getting their finances.”
Daoud is seeing growth in self‑employed lending volumes as lenders expand their credit appetites for business owners. Over the past 12 months, he’s seen a sharp lift in approvals as the majors relaxed long‑held constraints around self‑employed income. Policies allowing deals to be assessed on one year of self‑employed performance, rather than two full years of financials, have been a game‑changer for profitable businesses emerging from COVID‑era disruption.
Most of Daoud’s self‑employed volume is still written with traditional lenders, thanks to moves by Commonwealth Bank, NAB, ANZ and others to broaden their self‑employed criteria while remaining price‑competitive. However, non‑banks retain a crucial role in the self‑employed space.
Lenders such as Pepper, La Trobe and other specialist funders are on panel “for good reason”, says Daoud. They step in when clients have tax debt to clear, require company or trust lending that’s fallen foul of tighter bank rules, or present other non‑standard scenarios that can’t be serviced by the mainstream lenders.
