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

By Rhianna Dews · Monday, 13 May 2019 · 4 min read

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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.

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.

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^* 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. You can change the loan amount and term in the input boxes at the top of this table. 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.

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Rhianna Dews

RG146

Senior Money Writer

Rhianna has a Master of Journalism and Communication from UNSW, and has contributed to several consumer publications including TechRadar, Simply Living Australia, Beauty News Australia, Beauty World News and Fashion Gone Rogue. With over eight years of experience helping consumers make the most of their money, and a background in creating content for brands including Foxtel and Vodafone, means she's always the first to know the latest consumer trends. Her focus is on millennial money motivation and helping Aussies make smart money moves in personal loans, credit cards and online shopping.