Is the expanded 5% Deposit Scheme heating up the market?

The federal government expanded its 5% Deposit Scheme on 1 October 2025, making it far easier for first-home buyers to enter the market. Income caps were removed, the previous limit on places was scrapped and property price caps were increased across most locations. These changes mean eligible buyers can now purchase with just a 5% deposit and avoid paying lenders mortgage insurance.

Soon after the expansion, property prices recorded unusually strong growth. National median prices rose 1.1% in October – the strongest monthly increase since May 2023, according to Cotality. “Properties with an estimated value below the new caps of the scheme did outperform in October,” Cotality noted, although this trend had been in place for some time as affordability pressures had been pushing higher-income buyers into lower-priced segments.

Cotality said some markets saw a “notable increase in values below the scheme thresholds”, suggesting possible localised impacts. However, it cautioned that a clear causal link was hard to establish and that the full effect of the expanded scheme may take time to show. “Ultimately the expansion of the 5% Deposit Scheme is one of many factors influencing strong growth at the lower-to-middle end of the market,” Cotality noted.

What the 5% Deposit Scheme means for buyers

The expanded scheme opens the door to far more first-home buyers. Key features include:

• A minimum 5% deposit.
• No income caps or waitlists.
• No lenders mortgage insurance.
• Access to a broad range of property types, provided they fall within the new price caps.
  
  

To qualify, buyers must be Australian citizens or permanent residents and apply for an eligible principal-and-interest loan through a participating lender. The home must be an owner-occupied property, not an investment.

The scheme can fast-track entry into the market, but buyers should consider repayment capacity carefully, as borrowing with only a 5% deposit means taking on a higher loan-to-value ratio.

Thinking about using the expanded 5% Deposit Scheme? We can help you understand your options and see whether a low-deposit loan suits your circumstances.