Labor’s new 5% deposit scheme could help hundreds of thousands more Australians buy their first home from January 2026. The biggest change? No income limits and unlimited places, meaning almost any first home buyer can access government-backed loans with just a 5% deposit.
But with house prices still rising and the scheme 18 months away, should you wait or buy now? Here’s everything you need to know to make the right decision.
What’s Changing in 2026?
The Current System:
- Only 35,000 places per year
- Income caps: $125,000 for singles, $200,000 for couples
- Many buyers miss out
The New System (Jan 2026):
- Unlimited places – no annual caps
- No income limits – high earners can apply too
- 5% deposit only – down from the usual 20%
- No Lenders Mortgage Insurance (LMI) – the government covers this cost
How Much Could You Save?
The numbers are compelling:
- Average LMI savings: $23,000 per buyer
- For a $800,000 home: Save $22,000-$26,000 in LMI costs
- Deposit drops from $160,000 to $40,000 for that same property
- Property price caps will be raised to match current market prices
The Construction Bonus: Labor is also committing $10 billion to build 100,000 new homes specifically for first home buyers over eight years.
How It Compares to Current Help
Federal Programs:
- Current First Home Guarantee: 35,000 places, strict income limits
- New scheme: Unlimited places, no income limits
WA State Programs Still Apply:
- Western Australia: $10,000 grants available for eligible buyers
Combined benefits could reach $33,000 when you stack federal LMI savings with WA state programs.
What Loan Monster Thinks About the Scheme
The Good News:
- Removes unfair income caps that locked out middle-income earners
- $23,000 average savings is genuine relief for buyers
- Helps level the playing field for first home buyers
The Concerns:
- More buyers competing for the same homes could push prices up
- Construction of new homes won’t start until 2027-28
- Banks still have strict lending rules – 5% deposit doesn’t guarantee loan approval
- Price rises while waiting could cancel out the savings
Our Take: Don’t rely on the scheme alone. Interest rate cuts happening now might give you similar benefits without the wait.
Current Market Reality Check
Price Growth Right Now:
- Perth: +17.1% annually (WA leading the nation)
What This Means: In Perth’s hot market, waiting 18 months could see prices rise more than your LMI savings.
Should You Wait or Buy Now?
Buy Now If:
- You’re in Perth’s fast-growing market (+17.1% annually)
- You can afford current deposits and prices
- You want to start building equity immediately
- Interest rates are falling (they are)
Wait If:
- You’re struggling to save a 20% deposit
- You can access the dedicated new properties from 2027-28
- You’re risk-averse about market timing
The Reality Check: Property prices in Perth could rise $40,000+ while you wait, wiping out most scheme benefits.
Key Risks to Consider
Price Inflation Risk
More buyers with government backing could drive prices up faster than your savings grow.
Policy Changes
Governments can change policies. The scheme might be modified before or after launch.
Lending Standards
Banks still assess your income, expenses, and ability to repay. A 5% deposit doesn’t guarantee approval.
Market Timing
Entering at the wrong time in any market carries risks, regardless of deposit size.
Frequently Asked Questions
Do I qualify if I earn $150,000+?
Yes! The new scheme removes all income caps.
What deposit do I need?
Just 5% of the property value, saved as genuine savings.
Can I use it with state grants?
Yes, you can combine federal scheme benefits with state programs.
What if property prices fall after I buy?
You’re still responsible for the full loan. Government guarantees protect lenders, not buyers.
Are there property price limits?
Yes, but they’ll be significantly higher than current caps to reflect today’s market prices.
The Bottom Line: Your Decision Framework
Consider These Factors:
- Your local market – Perth’s hot market favours buying now
- Your deposit situation – Can you manage 10-20% now vs waiting for 5%?
- Interest rate trends – Current cuts might provide similar benefits to the scheme
- Your timeline – Need a home now, or happy to wait 2-3 years?
- Risk tolerance – Comfortable with market timing or prefer certainty?
Remember: This scheme is just one tool in the toolkit. Your situation matters more than any government policy.
Get Expert Guidance
Ready to make your move? Whether you’re buying now or planning for 2026, the right strategy depends on your unique circumstances.
At Loan Monster, we can help you:
- Compare your options – current market vs waiting for the scheme
- Calculate real costs across different scenarios
- Access existing programs you might be missing
- Get pre-approved to strengthen your position
- Plan your timeline for optimal results
Don’t let market uncertainty delay your homeownership goals. Every situation is different, and the right advice can save you thousands.
