Teachers, nurses, emergency service workers among scheme benefactors, but are they biting off more than they can chew?
Australia’s flagship 5% Deposit Scheme has passed a major milestone, helping over 300,000 first-home buyers into homeownership.
Fresh data from Housing Australia – the body responsible for administering the scheme, shows that, since launching in 2020, the scheme has been used by:
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Almost 60,000 key workers, including teachers, nurses and emergency service workers
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Over 99,000 Australians living in regional areas
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Almost 6,000 single women with dependents
Interest in the scheme ramped up significantly in October 2025, following a massive expansion that saw income limits removed, house price thresholds significantly lifted and annual quotas removed.
Under the scheme, the government guarantees three-quarters of a standard 20% deposit, enabling eligible buyers to purchase a home with just 5% down while avoiding costly lenders mortgage insurance (LMI).
Surpassing 300,000 participants is “a significant milestone” for the scheme, said Housing Australia chief executive Scott Langford. “Working closely with participating lenders, the Housing Australia team has successfully scaled the scheme from 10,000 places in its first year in 2020, to supporting more than 300,000 Australians today to take this important step towards the security of home ownership.”
Quality policy or pure vote grabber?
Critics of the scheme – of which there is no shortage – worry that it is a short-sighted sugar hit with long-term consequences for housing affordability.
Recent Cotality data backs that concern. Properties priced under the scheme’s lifted caps – effectively the pool of homes that can be bought with a 5% deposit – have been outperforming the rest of the market, with the October growth gap ranking among the largest differentials in the data series. That doesn’t prove causation, but it does suggest the scheme is channelling more purchasing power into an already tight price band.
Money.com.au property expert Debbie Hays describes the guarantee as help “only at the margins”. The deposit hurdle may be lower, but high prices, limited borrowing capacity and weak new‑build activity are pushing more buyers to compete for the same stock, driving up both prices and average debts.
The Real Estate Institute of Australia (REIA)’s latest Housing Affordability Report shows average mortgage repayments now consume 49.2% of median family income, a 2.2-percentage-point increase on the previous quarter.
“The expansion of the 5% Deposit Scheme has clearly succeeded in enabling more Australians, particularly first-home buyers, to enter the housing market,” said REIA president Jacob Caine (pictured, right). “However, the consequence has been that many new buyers have been able to commit to larger loans under the scheme, which has increased the proportion of household income required to service a mortgage.”
“The Australian Government 5% Deposit Scheme effectively undercuts insurers and gives away credit protection,” said S&P Global Ratings credit analyst Angela Zhou earlier this month. “It shifts mortgage credit risk from private insurers to the sovereign. This brings forward buyer demand and will further fuel house price appreciation.”
Inflationary by design?
Critics argue that was always going to happen. AMP Bank chief economist Shane Oliver (pictured, left) has labelled the 5% deposit policy “totally ridiculous”, warning that demand‑side subsidies in a supply‑constrained market inevitably capitalise into higher prices rather than sustainable affordability.
For a government under pressure to get real on housing, getting 300,000 buyers into homes is a headline achievement. Yet as the scheme’s reach expands, so too does concern that it is morphing from safety net to structural risk – for both individual borrowers and the broader housing market.
Sydney broker Joseph Daoud (pictured, centre), founder of It’s Simple Finance, has watched the scheme evolve from targeted support for lower‑income first‑home buyers into what he now calls an albatross hanging around some borrowers’ necks.
He was an early advocate. But the October 2025 expansion marked a turning point, he explained to MPA Pod. Higher-income clients, who could likely save a bigger deposit, are now using the guarantee to take on much larger loans with very little equity.
Daoud says that’s where problems begin. Many buyers who entered the market with a 5% deposit now want to refinance or turn their home into an investment, but often their property hasn’t risen enough in value to refinance without paying LMI, and the government’s stake must be unwound before they can rent it out. They’re effectively stuck.
Daoud argues these restrictions aren’t made clear at the start, and that the rush to get in sooner can hide long-term limits on flexibility, investment options and financial resilience.
Yet Housing Australia executive leader for the 5% Deposit Scheme, Emma Jarman, highlighted real-life success stories emerging from the initiative that act as a powerful validation of the scheme's intended purpose.
She said: “Our very first participant in 2020 was a teacher purchasing their first home in regional New South Wales. Since then, thousands more have been able to enter the housing market sooner – including the 300,000th and 300,001st participants, a young couple purchasing their first home in Sydney.
“We look forward to continuing our strong collaboration with participating lenders and their broker networks to support even more Australians into their own homes.”
