For many aspiring first-home buyers in Australia, saving a 20% deposit has long been a daunting hurdle. In 2025, the Albanese Labor government is introducing a game-changing policy to lower that barrier: the ALP government first home loan deposit scheme. This initiative allows first-home buyers to purchase a property with just a 5% deposit, with no caps on income or scheme places and no need to pay Lenders Mortgage Insurance (LMI). It’s a bold expansion of an existing program and a centerpiece of the ALP’s broader housing affordability plan. Let’s break down what this scheme entails, how it fits into Labor’s wider housing strategy – including a pledge to build 100,000 homes – and what benefits and drawbacks it brings for new buyers and the Australian property market.

What the 5% Deposit Scheme Entails

Under the new scheme, every Australian buying their first home can do so with only a 5% deposit. This is a major shift from the traditional requirement of 10-20% down, and it comes with several key features designed to make home ownership more accessible:

• No LMI (Lenders Mortgage Insurance): Normally, banks require borrowers with small deposits to pay LMI, which can run into tens of thousands of dollars. Under this scheme, the government guarantees up to 15% of the home loan (on top of the buyer’s 5% deposit) so that lenders treat it like an 80% loan. This guarantee means eligible buyers won’t pay a single dollar in LMI premiums. For an average buyer, that saves a significant sum – often around $20,000–$30,000 – which would otherwise be added to their costs.

• No Income Caps or Quotas: Unlike previous first-home buyer guarantee programs that were limited to certain income brackets or a fixed number of places per year, this expanded scheme has no income test and no cap on the number of participants. Any Australian citizen who has never owned a home and intends to live in the property can qualify. This removal of caps makes the assistance effectively universal for first-home buyers, whether you’re a teacher, a tradie, or a young professional in a high-paying job.
• Higher Price Limits: The scheme also raises the price ceiling on eligible homes. Buyers can purchase properties up to roughly the average price in their city or region and still qualify. In practical terms, this means price limits around $1.5 million in Sydney, about $950,000 in Melbourne, and corresponding caps in other capitals and regional areas. These higher limits acknowledge the reality that entry-level homes in some markets are very expensive. For example, a Sydneysider could buy a home up to $1.5 million with a $75,000 deposit under the scheme, whereas previously many Sydney first-home buyers were priced out of assistance programs that had lower thresholds.
• Government-Backed Loans: The government’s role is to act as a guarantor for that missing chunk of deposit (up to 15%). This backing gives banks confidence to lend to first-home buyers with small deposits, as if they had 20% down. Importantly, the buyer still needs to qualify for the loan and make all the repayments – this isn’t a free house or grant, but rather a way to accelerate getting a mortgage without years more saving. The arrangement simply removes the extra LMI cost and requirement for a larger upfront deposit.

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In short, the ALP’s first home loan deposit scheme slashes the deposit requirement to 5% and removes many of the old restrictions. It’s an expansion of an earlier scheme (which had limited slots and was targeted to certain incomes) into a nationwide, all-inclusive program. If you’re a first-home buyer ready to enter the market, you can do so sooner – potentially years earlier – because you don’t need to save that elusive 20%. As Prime Minister Anthony Albanese put it, “When a young person saves a 5% deposit, my government will guarantee the rest” – allowing them to jump into home ownership faster without the burden of LMI.

It is a part of a Broader ALP Housing Plan (100,000 New Homes)

This 5% deposit scheme isn’t a standalone idea; it’s one pillar of Labor’s larger “Homes for Australia” plan, a comprehensive strategy to tackle housing affordability from multiple angles. Alongside helping first-home buyers with deposits, the Albanese government is also focusing on the real long-term fix to Australia’s housing crisis: building more homes.

A headline component of the plan is a pledge to invest $10 billion to build 100,000 new homes over the coming years, reserved exclusively for first-home buyers. This is slated to be the biggest home-building program in Australia since the post-war housing boom. Here’s how it fits in:

• Dedicated First-Home Buyer Stock: These 100,000 homes will be for sale only to first-time buyers, not to investors or people upgrading. By ring-fencing new housing stock in this way, the plan aims to give first-home buyers a fair shot at buying a new property without competing against cashed-up investors or existing owners. Housing Minister Clare O’Neil highlighted that young buyers often can’t find affordable options because they’re outbid by investors or older generations. This policy tries to level that playing field by creating supply just for them.
• Timeline and Delivery: The construction of these homes is expected to commence by 2026–27 in partnership with state governments, developers, and community housing providers. Labor’s re-election would kick-start negotiations with states “from day one” to identify land, streamline planning approvals, and get building underway.
  While all 100,000 won’t pop up overnight, the goal is to steadily roll them out (the initial residents could move in by 2027–28) and maintain that momentum over about eight years. Essentially, it’s a supply pipeline targeted at the affordable end of the market.
• $43 Billion Housing Package: The 5% deposit scheme and the 100,000 homes initiative are part of a larger $43 billion Homes for Australia Plan that the Albanese government has put in motion. In its first term, the government already began significant housing efforts – for example, 55,000 social and affordable homes (with tens of thousands under construction) and increased rent assistance for low-income renters.
  Over 150,000 first-home buyers have already purchased with smaller deposits (5% or less) under the earlier version of the guarantee scheme. These first-term measures laid the groundwork, and now the expanded scheme and new home-building pledge build on that foundation. The message is that housing affordability is a priority, addressed through both demand-side help (deposit guarantees, tax cuts) and supply-side action (building more homes, social housing investment).

By integrating the first-home deposit scheme with a massive construction program, the ALP government is attempting to tackle the affordability issue from two directions. On one hand, they’re helping buyers overcome the deposit hurdle; on the other, they’re adding supply to ease pressure on prices. This two-pronged approach is crucial – if you only boost demand (by making it easier to buy), you risk pushing prices up unless supply improves too. Labor’s plan acknowledges this by marrying the deposit assistance with a commitment to increase housing stock.

Benefits for First-Home Buyers

The benefits of the 5% deposit scheme for first-home buyers are significant and fairly straightforward:

• Buy Sooner, Save Years: The most immediate benefit is a drastically lower deposit requirement. Instead of needing, say, $100,000 for a $500,000 home (20%), a first-home buyer would only need $25,000 (5%). For context, the median Australian home price is around $820,000 – a 20% deposit would be $164,000, whereas 5% is about $41,000. That difference can equate to many years of scrimping and saving. With this scheme, young buyers can enter the market earlier, while they’re building their careers, rather than chasing a moving target of rising prices. It cuts the time needed to save for a deposit dramatically.
• Thousands in Cost Savings: Avoiding LMI is not just a minor perk – it often saves tens of thousands of dollars for the buyer. LMI premiums, which protect the lender (not the borrower) if you default, can add a hefty lump sum or higher monthly payments. Under the ALP scheme, that money stays in the buyer’s pocket, making the overall cost of buying a home lower. Essentially, a first-home buyer could redirect funds that would have gone to insurance towards their mortgage or other expenses instead.
• Greater Choice of Homes: With higher property price caps and the scheme available nationwide, buyers have a wider selection of eligible homes. Previous programs often had price limits that were below the median house price in big cities, forcing buyers to the outer suburbs or to smaller units to qualify. Now, because the cap is around each region’s average price, first-home buyers can aim for a home that suits their needs without being as constrained by artificial limits. For example, a couple in Melbourne could purchase up to roughly a $950k home and still use the 5% deposit scheme – potentially the difference between a tiny apartment and a modest townhouse.
• Less Reliance on the “Bank of Mum and Dad”: In recent years, many young Australians felt the only way to afford a house was with help from their parents. The new scheme offers an alternative. As the Prime Minister noted, parents who felt compelled to dip into their retirement savings to help their kids with a deposit might no longer need to do so. The government guarantee steps in instead of parental guarantors or cash gifts, allowing first-home buyers to achieve independence and families to keep their savings for retirement or other needs.
• Exclusive New Supply for First-Home Buyers: Looking beyond the individual, first-home buyers stand to benefit from the 100,000 dedicated homes that will come onto the market for them. These properties, being earmarked for first-time buyers only, mean reduced competition from investors by design.
  If you purchase one of these new homes, you wouldn’t be bidding against seasoned investors or people with existing equity – ideally making the buying process less frenzied and more fair. Plus, new homes often have lower maintenance costs and better energy efficiency, which can save money long-term for their owners.
• Confidence and Ownership Equity: There’s also a less tangible but important benefit: a sense of confidence that the government is backing first-home buyers. Knowing that policies are in place to support you can encourage more young people to take the plunge. Once in the market, these new homeowners start building equity instead of paying rent. In the long run, that helps improve financial stability for a generation that has felt locked out of the property market.

Overall, the scheme directly addresses the biggest barrier most first-home buyers face – the deposit – and provides a pathway to ownership that was previously out of reach for many. It is good news for aspiring homeowners who have steady incomes and can afford loan repayments but struggle to accumulate a huge deposit in an era of high rents and cost of living pressures.

The ALP government’s first home loan deposit scheme is an ambitious and multifaceted strategy to help Australians achieve home ownership. By allowing first-home buyers to purchase with a 5% deposit (and no LMI), and coupling that with a large-scale home-building program, the policy seeks to unlock the door that has been closed to many would-be buyers. From an analytical standpoint, it’s a blend of immediate relief (lower deposit hurdle) and structural change (boosting housing supply). For first-home buyers reading this in 2025, the message is optimistic: there is concrete support on the table to help you get into the market.

Of course, buyers should remain savvy – do your homework on what you can afford, keep an eye on how local prices respond, and be prepared for the responsibilities that come with a mortgage. The scheme makes it easier to buy a home, but it doesn’t guarantee that every purchase will be a good one or that the journey will be stress-free. Normal due diligence (building inspections, budgeting for rate rises, etc.) still very much applies.