Australia 5% Deposit Scheme 2026: Current Price Caps, Eligibility and How Much Deposit You Really Need

Australia | October 13, 2026

Australia’s low-deposit homebuyer scheme has just passed an important milestone.

More than 102,000 first-home buyers used the expanded Australian Government 5% Deposit Scheme during its first year, according to Housing Australia data released by the federal government on October 1.

The scheme changed substantially on October 1, 2025. Income limits were removed, the number of available places became unlimited and property-price caps were increased. It is the programme previously known as the Home Guarantee Scheme, including the First Home Guarantee.

For an eligible first-home buyer, the headline benefit is simple:

you may be able to buy a home with a deposit as small as 5% without paying Lenders Mortgage Insurance.

But that sentence can also be misleading if it is taken to mean buying with 5% is automatically affordable or low risk.

Australia’s housing market has changed considerably during 2026. Cotality’s national Home Value Index fell 1.1% in September, the sixth consecutive monthly decline, leaving national dwelling values 5.2% below their March peak. Around 97% of capital-city suburbs recorded falling values over the three months to September.

That creates a very different question for first-home buyers:

The scheme can help you get through the deposit barrier—but should you use it to borrow 95% of a property’s value in today’s market?

Here is how the scheme actually works, the current 2026 property-price caps, the deposit required in each major market, and the risks that deserve just as much attention as the benefits.

Australia’s 5% Deposit Scheme: Quick Answer

Question	Current rule
Current name	Australian Government 5% Deposit Scheme
Former name	Home Guarantee Scheme
Minimum deposit for most first-home buyers	5%
Single-parent/legal-guardian stream	Minimum 2%
Income limit	None
Number of places	Unlimited
Lenders Mortgage Insurance	Not required under the scheme
Minimum age	18
Citizenship	Australian citizen or permanent resident
Previous ownership rule	First-home buyer or no Australian property/land ownership in previous 10 years
Investment property allowed?	No
Must live in property?	Yes
Application method	Through a participating lender
Can you apply directly to Housing Australia?	No
Government guarantee	Up to 15% of property value for the lender
Current price caps	Vary by location

The government guarantee is important to understand correctly.

The government does not give the buyer the missing 15% as cash.

Housing Australia provides a guarantee to the participating lender for up to 15% of the property value. The guarantee protects the lender in certain circumstances; it is not a deposit paid into your bank account and it is not government equity in your home.

You remain responsible for the mortgage.

What Changed With the 5% Deposit Scheme?

The expanded scheme began on October 1, 2025.

Three major restrictions disappeared.

There are now no income caps, no annual limit on the number of eligible places and higher location-specific property-price limits.

The government says 102,594 buyers used the expanded scheme during its first year.

Victoria accounted for 33,413 of those buyers, followed by New South Wales with 28,158, Queensland with 20,125, Western Australia with 11,207 and South Australia with 4,495.

That is no longer a small niche programme.

For many Australians attempting to buy their first home, it has become one of the main paths into owner-occupation.

Current 5% Deposit Scheme Price Caps in 2026

Housing Australia’s current official limits are shown below.

Location	Maximum eligible property price	Minimum 5% deposit at cap
NSW capital city & eligible regional centres	$1,500,000	$75,000
NSW other areas	$800,000	$40,000
Victoria capital city & Geelong	$950,000	$47,500
Victoria other areas	$650,000	$32,500
Queensland capital city, Gold Coast & Sunshine Coast	$1,000,000	$50,000
Queensland other areas	$700,000	$35,000
Western Australia capital city	$850,000	$42,500
Western Australia other areas	$600,000	$30,000
South Australia capital city	$900,000	$45,000
South Australia other areas	$500,000	$25,000
Tasmania capital city	$700,000	$35,000
Tasmania other areas	$550,000	$27,500
ACT	$1,000,000	$50,000
Northern Territory capital city	$750,000	$37,500
Northern Territory other areas	$600,000	$30,000
Jervis Bay Territory & Norfolk Island	$550,000	$27,500
Christmas Island & Cocos Islands	$400,000	$20,000

These are the current official caps published by the Australian Government. Both the purchase price and the participating lender’s assessed property value must remain within the applicable cap.

That second condition is easy to overlook.

You cannot simply sign a contract below the price cap and assume you qualify.

If the lender’s valuation creates an issue, discuss it with the participating lender before proceeding.

What Counts as a Regional Centre?

The higher capital-city cap also applies to certain designated regional centres.

In New South Wales these currently include areas such as:

Central Coast, Coffs Harbour–Grafton, Illawarra, Mid North Coast, Richmond–Tweed, Newcastle and Lake Macquarie.

In Victoria, Geelong receives the capital-city/regional-centre cap.

In Queensland, the Gold Coast and Sunshine Coast are included.

For everyone else, the “other areas” cap generally applies.

Because eligibility can depend on postcode, buyers should use the government’s postcode search and then confirm the result with their lender before signing an unconditional purchase contract.

Can You Really Buy a $1.5 Million Home With $75,000?

Potentially, under the scheme’s deposit rules.

But this is where the headline figure can become dangerous.

A NSW buyer purchasing at the full $1.5 million cap with exactly 5% would contribute:

$75,000

leaving roughly:

$1.425 million

to be financed before allowing for transaction structures and other costs.

Qualifying for the scheme does not mean a bank must lend you $1.425 million.

Housing Australia explicitly states that buyers still have to satisfy the participating lender’s normal credit and loan-approval requirements.

Your income, debts, expenditure, employment, credit history and ability to service the mortgage still matter.

The property-price cap is a maximum scheme limit.

It is not your personal borrowing limit.

The Scheme Does Not Pay Your Stamp Duty or Buying Costs

Another common misconception is that a 5% deposit means you only need 5% of the purchase price in total savings.

Not necessarily.

Depending on your location and circumstances, you may still need money for costs such as conveyancing, inspections, loan fees, moving expenses and any stamp duty not covered by a separate state or territory concession.

First-home buyer stamp-duty concessions are separate from the federal 5% Deposit Scheme.

A buyer should therefore calculate:

deposit + transaction costs + emergency savings

rather than putting every available dollar into the settlement.

Why Avoiding LMI Matters

Normally, lenders may charge Lenders Mortgage Insurance when a borrower has less than a 20% deposit.

The insurance protects the lender—not the borrower.

Under the government scheme, the Commonwealth-backed guarantee allows eligible borrowers to avoid that LMI cost.

Government figures released in October estimate that participants have collectively avoided more than $2.5 billion in LMI costs, including around $1.4 billion in the most recent year.

For a first-home buyer purchasing a median-priced Australian home with a 5% deposit, the government estimates the avoided LMI cost at around $23,700.

Actual LMI costs outside the scheme vary by lender, loan size and borrower circumstances, so that figure should not be treated as a universal personal saving.

Who Is Eligible for the 5% Deposit Scheme?

For the standard first-home buyer stream, the current rules require an applicant to be at least 18 and an Australian citizen or permanent resident.

You generally need to be either a first-home buyer or someone who has not owned property or land in Australia during the previous 10 years.

You must buy the property to live in rather than as an investment.

Applications can be made individually or jointly with one other person, who could be a partner, friend or family member.

The home loan must be through an authorised participating lender and generally use principal-and-interest repayments.

There are no income caps.

That means a high-income applicant is not automatically excluded simply because they earn above a particular salary threshold.

What Homes Can You Buy?

The scheme is considerably broader than many people assume.

Eligible buyers can potentially purchase:

a new home, an established house, townhouse, apartment, off-the-plan property, house-and-land package or vacant land combined with an eligible building contract.

For a vacant-land-and-build arrangement using separate contracts, however, the combined land price and construction cost must remain within the applicable property cap.

That is important for people planning to build.

A $400,000 block plus a $500,000 construction contract is effectively a $900,000 project for scheme-cap purposes.

You cannot assess the land price in isolation.

You Must Actually Live in the Property

The 5% Deposit Scheme is an owner-occupier programme.

It is not designed to finance an investment property.

Current Housing Australia guidance says buyers generally need to move into the home within six months of settlement and continue occupying it while the guarantee remains active.

If you move out and convert the property to an investment while the guarantee is still operating, your eligibility can be affected and the lender may require Lenders Mortgage Insurance or take other action.

That means buyers should not use the scheme assuming:

“I’ll live there for a month and then rent it out.”

The ongoing occupancy requirements matter.

Why the Scheme Became Controversial

Making the deposit easier does not automatically make housing cheaper.

In fact, increasing buyers’ purchasing ability without simultaneously increasing the number of homes available can increase competition for affordable properties.

Cotality studied the first six months after the scheme expanded.

Between October 2025 and March 2026, properties estimated to be below the scheme’s relevant price caps rose 6.7%, while homes above those limits increased 3.6%.

In Sydney, under-cap homes rose 4.1% while homes above the cap fell 1.1%.

Those numbers are important, but they should not be oversimplified.

They do not prove the scheme alone caused prices to rise.

Interest rates, available stock, affordability constraints and broader market conditions also influence home values.

But Cotality concluded that the expanded scheme appeared to add competitive pressure at the lower-priced end of the housing market.

That is the policy trade-off.

The scheme reduces the deposit barrier for one buyer.

It can simultaneously bring more buyers into competition for the same affordable properties.

The Market Has Changed Since That April Study

This is why using only the April figures today would give readers an outdated picture.

Australia’s housing market subsequently turned down.

Cotality says national home values fell 1.1% in September 2026 alone, marking the sixth consecutive monthly decline.

National dwelling values were 5.2% below their March peak by the end of September.

Sydney was down 8.6% from its February peak, while Brisbane recorded the sharpest monthly capital-city decline in September at 1.5%. Darwin was the only capital to avoid a monthly fall.

That creates an entirely different risk for buyers entering with a 5% deposit.

What Happens If You Buy With 5% and Prices Fall 5%?

Suppose you buy a home for:

$800,000

and contribute the minimum 5% deposit:

$40,000

Ignoring transaction costs and principal repayments for this simplified example, you begin with approximately $40,000 of equity.

If the market value then falls 5%, the property becomes worth about:

$760,000

That $40,000 decline is approximately the same size as the original deposit.

This does not automatically mean the bank forces you to sell.

If you keep making mortgage repayments and continue living in the home, a short-term valuation movement may have little immediate practical impact.

But your financial flexibility can be reduced.

Selling soon after a decline can be difficult because transaction costs and the remaining loan balance also matter.

This is why low-deposit buying works best when the purchaser has a long ownership horizon and stable repayment capacity, rather than expecting to sell again quickly.

Negative Equity: The Risk First-Home Buyers Should Understand

Negative equity occurs when the home becomes worth less than the mortgage balance.

It is more likely when someone buys with very little initial equity.

A buyer starting with a 20% deposit has a much larger buffer against falling prices than a buyer starting at 5%.

That does not mean a 5% deposit is inherently irresponsible.

It means the buyer should understand what they are trading:

less time saving for the deposit

for

more leverage and a smaller equity buffer.

In a rising housing market, leverage can work in the owner’s favour.

In a falling market, it works the other way.

The Government Guarantee Does Not Protect You From Falling Prices

This deserves particular emphasis.

The Commonwealth guarantee is designed to protect the participating lender against an eligible shortfall, up to the agreed guarantee limit.

It does not guarantee your home’s price.

It does not reimburse you if the property falls 10%.

It does not make your mortgage repayments for you.

And it does not erase your debt if you sell for less than you owe.

Housing Australia explicitly describes the guarantee as protection for the lender, not a cash benefit paid to the buyer.

The scheme solves a deposit and LMI problem.

It does not remove normal property-market risk.

5% Deposit vs 20% Deposit: A Simple Example

Consider a $700,000 property.

Buying with 5%

Deposit:

$35,000

Approximate loan before other adjustments:

$665,000

Buying with 20%

Deposit:

$140,000

Approximate loan:

$560,000

The scheme therefore allows the buyer to enter roughly $105,000 earlier in this simplified example.

That is a huge difference in the amount of savings required.

But the buyer using 5% also starts with a mortgage that is around $105,000 larger.

The lower deposit reduces the upfront hurdle.

It does not reduce the purchase price.

Should You Put Down More Than 5% If You Have It?

Possibly.

Five per cent is a minimum, not necessarily the financially optimal deposit for every buyer.

Housing Australia says buyers who have accumulated more savings may be asked to contribute more than the minimum in some circumstances.

Even where you have a choice, a larger deposit can reduce:

the loan amount,
monthly repayments,
total interest,
negative-equity risk.

But there is another side.

Using every dollar for the deposit can leave a household without emergency funds immediately after buying.

The appropriate balance depends on your finances rather than simply trying to reach the lowest possible loan-to-value ratio.

Does the Scheme Make a Home Affordable?

Not by itself.

This may be the single most important distinction.

Deposit affordability and mortgage affordability are different problems.

A household may have $50,000 available for the deposit on a $1 million property.

That does not mean the household can safely repay a roughly $950,000 mortgage.

Australian lenders still perform normal serviceability assessments.

Being eligible for the government guarantee does not override the lender’s credit policy.

This has become especially important in 2026 as higher interest rates have reduced borrowing power.

Current Buyers Are Facing a Tougher Mortgage Environment

Cotality has reported that affordability and higher interest rates are now major drivers of the housing downturn.

Its September data shows declines spreading across almost the entire capital-city market.

Earlier Cotality analysis also found that higher rates were forcing buyers in markets such as Brisbane and Perth to demonstrate substantially more household income just to service median-priced homes.

So the real bottleneck for some first-home buyers is shifting.

In previous years the question may have been:

“How can I save a 20% deposit?”

For some buyers today it is:

“Can I actually service the mortgage even if the government lets me buy with 5%?”

Those are different problems.

Is There an Income Cap in 2026?

No.

This is one of the biggest changes from the older Home Guarantee Scheme.

The current Australian Government 5% Deposit Scheme has no income cap for the standard first-home buyer stream.

A buyer earning a comparatively high income can therefore qualify provided the other requirements are met.

However, a high salary does not allow someone to exceed the location’s property-price cap.

Income eligibility is uncapped.

Property eligibility is not.

Is There a Waiting List?

No.

Places are currently unlimited for eligible applicants.

This is a major improvement over earlier versions of the scheme, where a fixed number of guarantees could create concern about places running out.

Today the practical constraints are more likely to be:

the price cap, lender approval, deposit, serviceability and finding an eligible property.

Which Banks Offer the Scheme?

Housing Australia currently lists more than 30 participating lenders, including major banks and a range of smaller banks, mutuals and credit unions.

Participating institutions include Commonwealth Bank, NAB, Westpac, ANZ and numerous regional and mutual lenders.

You cannot apply directly to Housing Australia.

The lender handles the application as part of your home-loan process.

That also means buyers should not assume every lender offers identical mortgage pricing.

The government guarantee is the same policy framework, but the underlying loan can still differ by lender.

Compare:

interest rate, comparison rate, fees, offset options, redraw features and early-repayment conditions.

How Does the Application Process Work?

The practical route is relatively straightforward:

Check that you meet the scheme criteria and identify the correct property-price cap for the postcode.
Approach a participating lender and complete its normal mortgage assessment.
Obtain pre-approval and confirm scheme eligibility.
Search for an eligible property within the price cap.
Confirm both purchase price and lender valuation satisfy the scheme.
Sign the contract and complete final loan approval.
Settle and move into the home within the required period.

Government guidance says a pre-approved buyer generally has 90 days to find a home and sign a contract, subject to lender and scheme requirements.

Do not assume an online eligibility checker equals mortgage approval.

Only the participating lender can confirm the loan.

What About Single Parents?

The Australian Government scheme also contains a separate stream for eligible single parents and legal guardians.

That stream can allow a qualifying buyer to purchase with a minimum deposit of 2% rather than 5%.

Unlike the normal first-home buyer stream, an eligible single parent or guardian does not necessarily have to be a first-time owner, although property-interest conditions still apply.

Because the leverage is even higher with a 2% deposit, applicants should pay particular attention to repayment capacity and the equity buffer.

What If You Want to Build Instead of Buy?

The scheme can support new construction.

Eligible property types include house-and-land packages and vacant land combined with a qualifying building contract.

But the cap applies to the entire eligible property project, not simply the vacant lot.

Housing Australia states that when land and build contracts are separate, the total land price plus construction costs must stay at or below the relevant location cap.

That means cost overruns deserve careful attention.

A buyer considering construction should have a detailed budget covering not only the builder’s headline contract price but also site works, variations, utility connections, landscaping and other costs that may sit outside the advertised base house price.

What Should Buyers Check Before Using the Scheme?

The scheme is valuable when it removes an artificial barrier for a household that already has strong repayment capacity.

It becomes more dangerous when the 5% deposit is used to stretch into the maximum possible property.

Before buying, make sure you understand your real monthly repayment, maintain an emergency fund, compare several participating lenders, verify the property cap for the exact postcode, check building and pest issues where relevant, understand strata costs for apartments, obtain appropriate legal advice and test your budget against higher living costs.

Most importantly, ask yourself whether you could still manage the mortgage if selling the property quickly was not financially attractive.

A first home should ideally be purchased with enough time to ride through a normal property cycle.

Did the 5% Scheme Push Up Australian House Prices?

There is evidence of stronger price performance in the segment targeted by the scheme, but there is not enough evidence to say the programme alone caused the difference.

Cotality found that during the first six months after expansion, homes below the relevant caps gained 6.7%, compared with 3.6% for homes above them.

Treasury modelling released under freedom-of-information laws estimated the expanded policy could leave dwelling prices approximately 0.6% higher after six years than otherwise.

Both findings are useful context.

Neither means every home rises by a fixed amount because of the scheme.

Housing prices respond to many variables simultaneously.

The 2026 Housing Downturn Changes the Calculation

Ironically, the current downturn may eventually make more properties fit comfortably beneath the scheme’s caps.

Cotality says national values are already 5.2% below their March peak.

For buyers, lower prices can improve entry opportunities.

But falling prices also increase the importance of avoiding overpaying when using a small deposit.

A 5% deposit should not become an excuse to bid aggressively simply because the property technically fits under the government cap.

The cap answers:

“Is this property potentially eligible?”

It does not answer:

“Is this property worth the asking price?”

Those are very different questions.

Frequently Asked Questions

What is the First Home Guarantee called in 2026?

The former Home Guarantee Scheme was rebranded from October 1, 2025 and is now called the Australian Government 5% Deposit Scheme.

Can I buy a house in Australia with a 5% deposit?

Eligible first-home buyers can use the scheme with a minimum 5% deposit, subject to lender approval and location-specific property-price caps.

Do I have to pay Lenders Mortgage Insurance?

Eligible borrowers using the scheme do not pay LMI under the scheme structure.

What is the property-price cap in Sydney?

The current NSW capital-city and qualifying regional-centre cap is $1.5 million.

What is the cap in Melbourne?

The current Victorian capital-city/Geelong cap is $950,000.

What is the Brisbane price cap?

The current Queensland capital-city, Gold Coast and Sunshine Coast cap is $1 million.

Is there an income limit?

No. The expanded scheme currently has no income cap.

Can permanent residents use the scheme?

Yes. Current eligibility includes Australian citizens and permanent residents who otherwise meet the rules.

Can I use the scheme for an investment property?

No. The property must be bought as an owner-occupied home.

Can two friends buy together?

Current rules allow a joint application with one other person, including a partner, friend or family member, provided both satisfy the relevant eligibility requirements.

Does the government own 15% of my house?

No. This is not a shared-equity arrangement. Housing Australia guarantees part of the lender’s exposure; it does not receive a 15% ownership stake under the 5% Deposit Scheme.

What happens if house prices fall after I buy?

The government does not guarantee your property value. A low-deposit buyer can lose their initial equity quickly when values fall, although a price decline does not automatically force a sale if mortgage repayments continue.

Final Takeaway

Australia’s 5% Deposit Scheme is doing exactly what its name suggests:

making the deposit hurdle much smaller.

More than 102,000 first-home buyers used the expanded version in just its first year.

For someone buying a $700,000 home, the difference between saving a 20% deposit and a 5% deposit is roughly:

$140,000 versus $35,000.

That can move homeownership forward by years.

But the scheme does not make a $700,000 home cost less.

It allows the buyer to finance more of it.

And that difference matters more in October 2026 than it did when the scheme expanded.

Australian property values are now falling across most major markets. Mortgage affordability remains difficult, and buyers starting with only 5% equity have less protection against further declines.

So the right question is not:

“Can I buy with only 5%?”

It is:

“Can I comfortably own this particular home with a 95% mortgage?”

If the income is stable, the repayment is manageable, emergency savings remain intact and the buyer intends to stay for the long term, the scheme can be a powerful way around the deposit barrier.

If the purchase only works by borrowing the maximum amount available and hoping property prices immediately rise, the same 5% deposit that makes buying possible can also leave very little margin for error.

The government guarantee protects the lender.

Your own financial buffer still has to protect you.

First Home Guarantee 2026: Australia 5% Deposit Scheme, Price Caps & Eligibility