How the New 5% Deposit Scheme Is Rewriting the Path to Home Ownership

Key takeaways

The First Home Guarantee expansion lowers the required deposit to just 5%, with the government guaranteeing up to 15%. This slashes years off the time it takes to save.

In Sydney, buyers now need around 3 years to save compared to over 10 years previously. In Melbourne, the wait drops from nearly 8 years to just over 2. Other capitals also see timelines shortened by 4–6 years.

The scheme is a game-changer for first-home buyers, collapsing the deposit hurdle from a decade-long challenge to just a couple of years.
But speed comes at a cost: thinner equity, bigger mortgages, and greater financial exposure.

For decades, the biggest stumbling block for first-home buyers hasn’t been affording the mortgage; it’s been scraping together the deposit.

In fact, many households faced the sobering reality of saving for close to a decade before they could even put their foot on the property ladder.

But since October 1, a major expansion of the First Home Guarantee has shifted the landscape.

What once felt like an almost impossible climb now looks more like a manageable step.

What's changing?

Under the revamped scheme, buyers only need a 5% deposit, with the government stepping in to guarantee up to 15% of the loan.

Crucially, this eliminates the need for costly lender’s mortgage insurance (LMI), shaving tens of thousands off upfront expenses.

And with no income caps, unlimited places, and higher price caps that better reflect today’s property market, more Australians are suddenly in the game.

The numbers tell the story. According to Domain’s analysis:

• In Sydney, where a 20% deposit once meant saving for over 10 years, households now only need around 3 years, wiping out more than 7 years of effort.

• In Melbourne, the savings timeline drops from nearly 8 years to just over 2 years.

• Even in more affordable markets like Brisbane and Adelaide, the new scheme cuts saving time by more than five and a half years.

• In Perth and Hobart, buyers trim over four years from the journey.

Table 1. Time to save for a deposit (based on the property price caps).

As the report put it: what once took the better part of a decade can now be done in just a couple of years. 

Dr Nicola Powell, Domain’s Chief of Research and Economics, summed it up well:

“The scheme removes the single biggest obstacle for many first-home buyers:  the deposit. But while it accelerates the path to ownership, it also reshapes the risks and realities buyers face.”

And that’s the key here.

Yes, buyers can leap into the market sooner, but they’ll be doing so with thinner equity buffers and larger mortgages. That leaves them more exposed if conditions turn.

What buyers need to keep in mind

The benefits are obvious:

• Earlier entry to the market  allowing buyers to start building equity and benefit from long-term property growth sooner.

• No LMI - saving households tens of thousands upfront.

• Wider eligibility  - with unlimited places and no income caps, many who were previously locked out now have access.

But the challenges are equally clear:

• Serviceability remains a hurdle - banks will still stress-test borrowers’ ability to repay, so the mortgage itself is no easier to manage.

• Risk of negative equity - with little equity buffer, a drop in property values could leave some buyers owing more than their home is worth.

• Larger mortgages - a smaller deposit means more debt, increasing exposure to interest rate shifts.

• Government risk - by guaranteeing up to 15% of loans, taxpayers are indirectly more tied to housing market performance.

The bottom line

The new 5% scheme is undeniably a breakthrough for aspiring homeowners.

It collapses the deposit hurdle from a mountain into a molehill and gives households a genuine shot at entering the market years earlier than they ever thought possible.

But speed always comes with trade-offs.

Buyers will need to go in with their eyes wide open, aware of the thinner safety nets and the bigger debts they’ll carry.

For strategic investors and homebuyers alike, the opportunity is clear,  but so is the need for caution.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.