Government Scheme Drives Competition for Lower-Priced Properties
If you’re looking to buy at the more affordable end of the market, competition is increasing and fast. The federal government's expanded 5% Deposit Scheme is reshaping buyer behaviour and if you're trying to purchase in the lower price brackets, understanding what's driving this shift could shape your strategy.
Since the scheme's expansion in October 2025, a clear pattern has emerged in Cotality data: properties priced below the scheme's regional thresholds are appreciating faster than those above it. During the December quarter, median values for below-cap properties rose 3.6%, compared to 2.4% for higher-priced alternatives.
What is the 5% Deposit Scheme?
It allows eligible buyers to purchase a home with just a 5% deposit without paying Lenders Mortgage Insurance (LMI), a cost that can run to tens of thousands of dollars. The government guarantees the remaining portion of the deposit, making it a meaningful saving for buyers who haven't yet built up a full 20% deposit.
Notably, the price appreciation trend emerged before the scheme's official launch, suggesting buyers moved proactively to get ahead of anticipated competition. That pattern appears to be continuing. Two dynamics are combining: buyers positioning ahead of expected demand, and broader affordability pressures steering households toward properties that align with their borrowing capacity.
What scheme-eligible buyers need to know
Price caps vary significantly by location. The scheme's property price threshold differs depending on where you're buying, caps are higher in capital cities and lower in regional areas. Confirming the cap for your target location is the first step, as it determines whether the scheme applies at all.
Not all participating lenders assess loans the same way. While the scheme removes the LMI barrier, lenders still apply their own serviceability assessments. Interest rate buffers, acceptable income types, and how they treat existing debts can all differ between the 30+ approved lenders. So comparing options matters more than it might for a standard loan.
Standard credit requirements still apply in full. The scheme covers your deposit gap, it doesn't change your borrowing capacity or credit assessment. You'll still need to demonstrate genuine savings, a clean credit history, and the ability to service repayments at the lender's assessment rate.
If you're thinking about buying in this price range, we can review your scheme eligibility, compare participating lenders, and model realistic repayment scenarios based on your situation, before the competition heats up further.