“We want to help young people and first home buyers achieve the dream of home ownership sooner,” Albanese announced today.
“Bringing the start date of our 5 per cent deposit scheme forward will do just that.”
Here’s how the scheme will actually work and how much time it could save everyday Australians trying to save a deposit for their first home.
What is the Labor 5 per cent home deposit scheme?
The scheme will allow all first home buyers in Australia purchase a home with only a 5 per cent deposit instead of the usual 20 per cent.
For example, a first home buyer could purchase a $1 million home with a $50,000 deposit instead of a $200,000 deposit.
That will slash the amount of time it takes them to save said deposit.
It was originally slated to begin in 2026 but was brought forward to October 1, 2025.
Labor designed the scheme to help “level the playing field” and allow thousands of younger Australians get into home ownership.
“It’s just not right that an entire generation of young Australians have been locked out of the housing market – saving for decades while paying off someone else’s mortgage,” Housing Minister Clare O’Neil said.
“So Labor’s changing it.”
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How does the 5 per cent home deposit scheme work?
Under Labor’s scheme, first home buyers only need to pay a 5 per cent deposit to purchase a home.
The Albanese government will guarantee a portion of a first home buyer’s home loan to allow for this lower deposit.
First time home buyers won’t have to pay lenders mortgage insurance either, potentially saving them tens of thousands of dollars.
There will be no caps on places or income limits, meaning all Australian first home buyers can apply regardless of how much they earn.
Property price caps will also increase to better reflect the average house prices in cities across the country, which have risen significantly since the pandemic.
The price cap in Sydney will rise from $900,000 to $1.5 million, in Melbourne it will go from $800,000 to $950,000, and in Brisbane it will rise from $700,000 to $1 million.
Estimated time to save a 5 per cent deposit vs 20 per cent
But that’s just the Australian average; average times can be significantly shorter or longer across capital cities.
For example, it takes six years and nine months to save a 20 per cent deposit for an entry house in Sydney.
In Darwin, the average is three years and five months.
Those times are reduced significantly when the deposit is lowered, as evidenced by the government’s Help To Buy Scheme.
Under the scheme, eligible individuals earning $90,000 or less or couples earning $120,000 or less can get a home loan with a minimum deposit of just 2 per cent (provided they meet certain asset thresholds).
The average time saved across Australia when aiming for a 2 per cent deposit compared to 20 per cent on an entry-priced home was four years and three months.
In Sydney, the average time was slashed by almost six years and in Darwin it was reduced by three.
What will happen to house prices?
While Labor’s fast-tracked 5 per cent home deposit scheme will benefit some Australian first home buyers, there may be drawbacks.
Mortgage broker Siddhartha Bajracharya previously told 9news.com.au the cost of a five per cent deposit may get a lot bigger as house prices skyrocket under low supply.
“This will help more first-home buyers purchase houses as long as they can service and qualify but I think rather than this creating unmanageable home loans, it would only make the property prices go up,” he said.
“I think the government should push the land and construction side as well.
“More houses will probably bring the housing prices under control and I think the economy could benefit.”
