Prime Minister promises Aussie first home buyers would only pay a 5% deposit if his government was re-elected

By Rhianna Dews ·

Striving to help Aussie first home buyers enter the market, Prime Minister Scott Morrison has just promised that if his government is re-elected, first home buyers would only need a 5% deposit instead of the standard 20% deposit. Labor has since agreed to match the policy.

Under this new scheme, the government would guarantee the difference in cost needed to meet the 20% deposit threshold, saving Aussies thousands on mortgage insurance and halving the time it takes to save up for a house deposit.

What exactly is on offer?

While details of exactly how the scheme will work are few, a government guarantee on part of a borrower’s deposit would mean Aussie families won’t have to shell out for Lender’s Mortgage Insurance.

Considering that for a $400,000 home loan with a 5% deposit, you'd usually be paying around $12,768 on lenders mortgage insurance, this is a huge potential saving.

This will help Aussies get into the property market quicker, although, hopeful homeowners should be aware that a higher LVR often means a higher interest rate. It remains to be seen whether banks will treat borrowers using the scheme in the same way as a borrower who saved up a full 20% deposit.

Who’s eligible?

The policy would be limited to first home buyers earning an income of up to $125,000 or couples with a maximum combined income of $200,000.

Will this make being approved for a home loan easier?

Banks will still be doing all the same checks to make sure that borrowers can afford to service a home loan before approval, so it won’t necessarily be easier to get a loan. It will be easier to save up the necessary deposit without worrying about LMI charges.

Borrowers still need to show a lender a record of responsible finances, including evidence of good savings, along with other financial information like income, fixed expenses and other debt.

Related story: 8 ways to boost your chances of home loan approval

With an anticipated market flood of first home buyers should this new scheme go ahead, there is now also concern around the potential for house prices to skyrocket as a result.

Hot home loans - rates updated daily

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure.
  • placeholder
    Mozo Experts Choice 2021
    Smart Booster Home Loan

    2 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    1.85% p.a.variable for 24 months and then 2.25% p.a. variable
    2.21% p.a.

    New super low introductory rate home loan for two years. Min 20% deposit. No monthly or ongoing fees. Fast settlement times. Mozo award-winning online lender. Friendly, local Australian based team.

    Go to site
    Details
  • placeholder
    UHomeLoan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.95% p.a.
    fixed 3 years
    2.27% p.a.

    $0 fees and easy application. Choose between weekly, fortnightly or monthly repayments. 3 year fixed rates are for new Owner Occupier Principal & Interest loans.

    Go to site
    Details
  • placeholder
    Mozo Experts Choice 2021
    Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required. Winner of three Mozo Expert's Choice Awards for 2021.

    Go to site
    Details
  • placeholder
    Variable Home Loan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.

    Refinance only. Super-fast digital application process. Zero upfront fees. No on-going service fees. Free 100% offset sub account. Comes with Visa debit card and the ability to use digital wallets; Apple and Google Pay. 25% deposit required.

    Go to site
    Details
  • placeholder
    Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    2.09% p.a.
    fixed 3 years
    2.32% p.a.

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

    Go to site
    Details

About to take that big step and buy your first home? Check out our first home loans comparison table to find the right home loan to help you enter the market.

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.