First Home Buyer Debt Rose $50,000 Under Deposit Scheme, Primara Research Says

As federal modifications to the 5 per cent deposit scheme affect mortgages, Peter Drennan, the head of research at Primara Research, noted that novices are matching pace with other purchasers for the initial time in two years, though it comes with a loan nearly $50,000 larger.

First home buyers entering the Australian property market have taken on an average of $50,000 more debt following the expansion of Labor’s five per cent deposit scheme, according to figures reported by news24.com.au. New findings from Primara Research, commissioned by Temple and Webster, revealed that the average first home buyer loan surged 8.9 per cent since the scheme opened, reaching $610,063 in June. This represents an increase of approximately $49,800 from October 1, 2025.

Loan Sizes Jump After Deposit Scheme Income Caps Vanish

The modelling indicates that the $49,800 increase in loan size translates to an extra $587 in higher repayments every month for a 30-year term. Following the elimination of income caps on the 5 per cent deposit scheme, Primara Research found that the average loan for a first home buyer rose by 8.5 per cent over the course of that quarter. Loan sizes subsequently grew by just 0.4 per cent in the following six months, indicating that the vast majority of the increase concentrated immediately after the deposit scheme expanded.

Primara estimated that about half of the $49,800 jump aligns with the broader rise in loan sizes, while the remaining half remains distinct to the policy shift.

RBA Warns Five per Cent Scheme Increases Negative Equity Risks

The RBA cautioned that borrowers using the five per cent scheme were particularly exposed to negative equity as property prices fall.

The RBA modelled a scenario involving a uniform 20 per cent decline in house prices, estimating it would push approximately 5 per cent of mortgages into negative equity. Despite these pressures, the central bank observed that overall household and business borrower resilience remains high, with loan arrears staying low despite higher inflation and interest rates.

Income Caps Removed and High-Income Participation

The Albanese government opened the five per cent deposit scheme to people on all incomes in late 2025. Prime Minister Anthony Albanese defended the policy, saying it was “helping Australians” to “achieve the dream of home ownership”.

Senate estimates data revealed that removing the caps opened the system to high-income earners. Approximately 7 per cent of single applicants, totalling 1,162 people, reported incomes exceeding $200,000, including 38 individuals earning above $400,000. Among joint applicants, 9.8 per cent of participating couples combined incomes above $250,000, with 92 couples earning over $400,000 utilizing the scheme between 2020 and May 31.

Political Clash Over Market Demand and Supply

Shadow housing minister Andrew Bragg asserted that the government is exacerbating market strains by stimulating demand. Labor keeps pumping demand through schemes like the 5 per cent deposit guarantee, Senator Bragg told news24.com.au, adding that open access regardless of income crowds out buyers who need assistance most.

Meanwhile, Primara Research noted a split among program participants. According to Mr Drennan, some buyers used the scheme because they lacked savings for a full deposit, forcing the additional $587 monthly repayment out of tight household budgets. Others possessed the required funds beforehand and chose to keep cash on hand for furnishing properties while maintaining the larger mortgage.

More on this story: Australia median dwelling value falls for sixth month, Cotality says

Not every first home buyer using this scheme is in the same position. Some didn’t have that last deposit saved, so the extra $587 a month comes out of an already tight budget.

Peter Drennan