The Real Cost of a 5% Deposit: What the Albanese Government’s First Home Buyer Scheme Means for You

The Albanese Government has announced an expansion of its 5% deposit scheme for first home buyers. On the surface, it looks like a dream come true: instead of saving for years to reach the traditional 20% deposit, eligible buyers can step onto the property ladder with as little as 5%. But before you pop the champagne, it’s worth asking: what does this really mean for your mortgage, your repayments, and the broader housing market?

A Smaller Deposit = A Much Larger Mortgage

Let’s keep it simple. On an $800,000 home:

• 20% deposit ($160,000) means you borrow $640,000.
• 5% deposit ($40,000) means you borrow $760,000.

That’s an extra $120,000 you’ll be paying interest on, every month, for decades. At today’s interest rates (around 6%), that difference means an extra $720 every month in repayments and more than $139,000 extra in interest over the life of a 30-year loan.

So while the scheme lowers the barrier to entry, it also means your financial commitment is much bigger and riskier.

Higher Demand, No Extra Supply

Economics 101: when you boost demand without boosting supply, prices rise.

The 5% deposit scheme puts more buyers into the market, all chasing the same limited pool of homes. Builders aren’t suddenly producing more stock just because deposits are smaller.

This means first home buyers could end up competing against each other, bidding up prices. Ironically, the very scheme designed to make homes more affordable could help push values higher.

Who Really Benefits?

In the short term, sellers benefit from increased demand, banks benefit from larger loans, and governments benefit from the political win.

First home buyers? They face the risk of stretching themselves too thin, committing to bigger mortgages in a market where prices could keep climbing faster than wages.

A Smarter Way Forward

For anyone considering the scheme, the key is to run the numbers carefully. Work out:

• What will your repayments look like on a 5% deposit vs 20%?
• How will interest rate rises impact your monthly budget?
• What sacrifices are you willing to make in lifestyle and future flexibility to service a bigger loan?

Getting into the market sooner is tempting, but a rushed entry at the wrong price can lock you into decades of financial pressure.

Final Thought

The Albanese Government’s 5% deposit scheme will open the gates to more buyers, but it won’t build more homes. That imbalance means upward pressure on prices and larger loans for those entering the market.

If you’re a first home buyer, the scheme isn’t “free money” — it’s a trade-off. Lower entry savings today for potentially higher repayments tomorrow.

Before you jump, make sure the numbers make sense for you, not just the headlines.