Most Australian first home buyers are using the government’s 5% deposit scheme, with one in three new participants earning more than the scheme’s previous cap for high income earners.
The influx of high income earners into the first home guarantee program, economists warn, has pushed up property prices by increasing buying capacity for people who would have bought anyway.
The former Coalition government installed a scheme whereby lower-income first-time buyers could borrow 95% of a property’s value and have the government pay for their lenders’ mortgage insurance.
Labor scrapped the income caps of $125,000 for single borrowers and $200,000 combined for joint borrowers last year, fulfilling a pre-election pledge.
Data from Housing Australia, prepared for Senate estimates and seen by Guardian Australia, shows the scheme backed 15,924 single borrower loans and 23,790 joint loans from 1 October, when the income cap was removed, to 30 April.
The 39,704 government-backed loans include 13,979 over the scrapped income caps: 6,812 single borrowers with incomes over $125,000 and 7,167 joint borrowers earning over $200,000.
At the upper end, nearly 1,000 single Australians earning $200,000 and above, and 1,251 couples earning a combined $275,000 or more, enjoyed a government-backed 5% deposit.
Amy Auster, chief executive of Policy Institute Australia, said the removal of caps had meant support flowed to people in better financial positions.
“It always matters because … government support traditionally goes to the people who need it the most,” Auster said.
“There’s been an ongoing expansion of efforts to financially support … first home buyers, and I understand why, but in the end, it hasn’t solved the problem.”
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Saul Eslake, an independent economist, said the scheme had likely been used by people who would have bought homes anyway while inflating their debt.
“The way it was expanded by Albanese goes to the heart of why we have the housing problems that we have,” Eslake said.
“Whenever governments do things that allow people to spend more on housing than they would have otherwise, they end up spending more on housing.”
A borrower with $50,000 in savings, if required to make a 20% deposit, would only have been able to borrow $200,000. Under the 5% deposit scheme, they would be able to borrow $1m.
Prices have soared since the expansion of the scheme. Labor lifted the price caps by hundreds of thousands of dollars to include homes below $1.5m in NSW cities, $1m for south-east Queensland, $950,000 for Melbourne and Geelong, $850,000 for Perth, $900,000 for Adelaide and $700,000 for Hobart, with varying levels in the regions.
Homes under those levels saw slower price rises than homes above those levels in early 2025, but rose much faster once the scheme was expanded, Cotality data shows.
Labor promoted the scheme as an effort to lower the deposit hurdle and increase home buying, but the data indicates most existing first home buyers simply adopted the scheme.
The government backed 5,670 5% deposit loans each month on average, from October to April.
Across Australia, all first home buyers took out 10,181 loans each month from October to March, on average, Australian Bureau of Statistics data shows.
That was less than a 3% increase on the prior six months, at 9,900 a month on average, suggesting the scheme has yet to significantly impact home ownership.
First home buyer activity has fallen since then as the housing market enters a downturn.
