5% Deposit Scheme May Close to Permanent Residents
The 5% Deposit Scheme May Soon Change: Here's What It Means for You
If you've been banking on the 5% Deposit Scheme to get into your first home, there's something you need to know right now. The Coalition has announced that, if elected, it will restrict the government's 5% Deposit Scheme to Australian citizens only, cutting out permanent residents who currently qualify for the program.
What is the 5% Deposit Scheme?
The 5% Deposit Scheme, formally known as the Home Guarantee Scheme, allows eligible first home buyers to purchase a property with just a 5% deposit, without paying Lenders Mortgage Insurance (LMI). In July 2023, the Albanese government expanded eligibility to include permanent residents, and since then, close to 50,000 non-citizens have accessed the scheme, roughly 16% of total participants.
Opposition Leader Angus Taylor announced that a future Coalition government would close the scheme to anyone who is not an Australian citizen. The proposal has drawn criticism from housing and immigration experts, who point out that permanent residents include long-term Australian residents, citizens' spouses, key workers like nurses and teachers, and people who have lived here for years, even decades.
The Numbers Tell a Different Story
Here's what stands out from a lending perspective: the default rate on this scheme is remarkably low. According to Housing Australia data, there have been just 12 defaults since the program launched in 2020. That's less than 0.01% of all guarantees issued.
In other words, non-citizens accessing this scheme haven't been a financial risk to the government. Quite the opposite, they've been among the most reliable borrowers.
What Does This Mean If You're a Permanent Resident?
Right now, the policy has not changed. The scheme is still open to permanent residents. But with an election approaching, things could shift, and the uncertainty itself creates a problem.
If you're a permanent resident who has been thinking about buying, here's our honest advice: don't wait to see which way this lands. Getting a clear picture of your borrowing capacity now means you'll know exactly where you stand, whether the scheme remains open to you or not.
What If the Scheme Closes to Permanent Residents?
If the Coalition wins and follows through on this policy, permanent residents will need to look at alternative pathways to enter the market. That doesn't mean buying becomes impossible; it just means the strategy changes.
Pre-approval under the current scheme rules doesn't automatically protect you if eligibility criteria change. Lenders assess loans at the time of settlement, not just at application. If a major policy change occurs between your pre-approval and your settlement date, it could affect your loan structure.
Ready to take the next step?
If you've got questions about the 5% Deposit Scheme, your eligibility, or how to structure your home loan in a changing market, Ask Financials is here to help.
Call us on 0433 944 055, or book a free consultation and let's talk through your options. Follow us on Instagram and LinkedIn for regular updates on the Australian property market and what it means for buyers like you.
