Five-percent deposit expansion faces criticism from Barefoot Investor

The Albanese government is expanding the Home Guarantee Scheme to allow first-home buyers to purchase with a five percent deposit, a move that takes effect on Oct. 1. The changes remove previous income and place limits and raise property-price caps to widen access to the program, which the government says would help buyers enter the market sooner and avoid lenders' mortgage insurance.

Under the overhaul, the government will act as guarantor and cover the other 15 percent of the deposit, enabling borrowers to put down five percent and borrow up to ninety-five percent of a home's value. The price caps are increased: Sydney up to $1.5 million, Brisbane to $1 million, and Melbourne to $950,000. The policy remains open to all eligible first-home buyers, regardless of income, and buyers would no longer need to save a twenty percent deposit to qualify.

Critics, including Scott Pape, known as The Barefoot Investor, say the expansion is insulting to would-be homeowners and could raise prices. In a Herald Sun column, Pape wrote that the policy would help buyers get a foot in the door and warned that a 95 percent loan could become unserviceable if rates rise.

Mr. Pape argued that the policy would push prices higher and encourage buyers to borrow more and save less, a pattern he described as subprime lending, Australian-style. He warned of postcode-based pockets facing higher repayments and potential negative equity if the market turns, with taxpayers on the hook to bail out borrowers in trouble.

Prime Minister Anthony Albanese defended the policy as a way to help buyers enter the market earlier, noting that two-thirds of voters own a home and that many MPs own more than one property. He argued the policy is politically sensible and would deliver a boost to home ownership for many families.

Analysts outside of Treasury have warned that the benefits to buyers could be offset by higher prices. Lateral Economics modelling for the Insurance Council of Australia suggested the policy could lift national house prices by about 6.6 percent in its first year, with sharper gains in areas where first-home buyers are concentrated; some areas could see gains nearing 10 percent. Treasury, by contrast, has estimated the scheme’s impact on prices as minimal, projecting around a 0.5 percent increase over six years. The modeling also noted that a buyer purchasing an $800,000 home could face $28,000 to $52,800 in higher costs due to higher prices, assuming housing supply does not expand.

The policy has drawn bipartisan criticism over its uncapped nature, with opposition housing spokesperson Andrew Bragg calling it an uncapped scheme that could benefit billionaires and the children of billionaires, and questioning the use of taxpayer funds to underwrite mortgage insurance. The government has defended the expansion as widening access for first-home buyers while acknowledging market risks. The program will roll out on Wednesday, three months ahead of its original start date of January 2026.