Labor’s first home buyer scheme doesn’t deserve the hate it’s getting

9 hours ago 2

Opinion

August 31, 2025 — 12.15am

Talk to any long-term renters and they’ll tell you about the cruel conundrum they face every pay day that hits like a one-two punch.

The first blow is the rent itself, which across most cities is now so high that it often matches what they would spend on mortgage repayments if they owned a property. The second blow is that with wage growth failing to keep up, record rents now eat up so much of their wages that being able to save anything at the end of each paycheck, let alone a 20 per cent housing deposit, is virtually impossible.

So, for the 31 per cent of Australian adults who are renting, the federal government’s announcement that it will bring forward its first home buyer support scheme and increase its guarantor cap this week was surely welcome news.

Housing Minister Clare O’Neil and Prime Minister Anthony Albanese during the election campaign, when Labor promised to expand the first home buyer support scheme by increasing the property price caps.

Originally set to kick off in January 2026, those hoping to buy their first home with a deposit of as little as 5 per cent will now be able to do so from October 1, and without having to take out lenders mortgage insurance.

That’s because the scheme involves the government acting as guarantor for the remaining 15 per cent, which will save homebuyers as much as $65,000. While there will be caps on the maximum that people can spend on properties, the scheme will be open to all first home buyers irrespective of income.

In Melbourne, where the median apartment price is $573,600 and the government guarantee goes up to $950,000, buyers could secure the keys to their first home with as little as $28,680 in the bank, while saving about $24,000 in lenders mortgage insurance. In Sydney, where the median apartment price is $834,791 and the guarantor cap is up to $1.5 million, the 5 per cent deposit climbs to $41,739, while the lenders mortgage insurance saving is roughly $32,000.

While the dollars still needed to get onto the property ladder are hardly chump change, they’re undeniably a lot more achievable than the respective $114,720 or $166,958 that would be required to achieve a 20 per cent deposit on a median apartment (in both cities, the median house prices are over the government guarantor cap – $1.06 million in Melbourne and $1.72 million in Sydney).

As is to be expected, the announcement was immediately followed by a new wave of outcry and warnings that the initiative will drive up housing prices and do nothing to ensure more Australians are getting into the market sooner.

That was then countered by those saying the updated proposal seems OK but imperfect. Then the government re-entered the chat to try to convince us that as per the initial announcement, it’s the greatest housing policy to hit Australia in decades.

The truth, of course, lies somewhere in the middle. Yes, it could nominally drive up house prices in specific areas or for particular types of housing. But in cities like Melbourne, where a building boom is well and truly under way, that’s also being offset by more housing stock being brought to the market.

No, it won’t mean we suddenly see every 21-year-old entering the property market as they graduate from university because it’s suddenly accessible for all. But it could mean that we see a drop in the average age of first home buyers and a decrease in the number of people renting long-term, which is a great thing.

And it’s here in this middle space of one side (pro 5 per cent) versus the other (20 per cent or bust) that the catch-22 of today’s housing crisis is perfectly on display.

To demonstrate just how small the difference is between renting and owning right now, let me break it down for you in real terms. In Melbourne, the median rent for an apartment is $575. If you were to borrow $458,880 (the median Melbourne apartment price minus 20 per cent deposit) at a rate of 5.68 per cent for 30 years, the weekly mortgage repayments would be $615.

Labor says its Help to Buy scheme will aid 40,000 people to buy homes.

Assuming you’re taking out that amount as a couple, that means the difference between being an owner of your own home instead of a tenant requires you to find an extra $20 a week. Think about that for a minute.

In Sydney, the median rent for an apartment is $740 a week. If you were to borrow $667,833 (the median apartment price minus 20 per cent deposit) at 5.68 per cent for 30 years, the weekly repayments would be $894. While $154 is a substantially bigger jump in spare change for Sydneysiders than it is for Melburnians, when split between two people, it’s $77 a week. Again, if it’s the promise of home ownership before retirement age or a lifetime of renting, most people would be able to find that amount somewhere in their budget.

If you accept that mortgage holders have been struggling to make ends meet recently thanks to stagnant wage growth, the cost-of-living crisis and successive interest rate rises (chances are, you’re like me and are one of them), imagine being a renter.

They’re not only paying pretty close to the same amount as mortgage holders, but also have to find a decent chunk of spare cash to put away for a deposit. It’s no wonder the great Australian dream of owning a home is remaining a dream and not a reality for so many people.

What’s more, if you are in the average first-time buyer age range of 36, that means you’ve likely been renting for the better part of a decade. That’s a very long proven history of being able to make weekly payments, of being financially responsible, of money that could be coming off your own mortgage but has instead been going towards someone else’s.

There are a multitude of good reasons that our banks require a 20 per cent deposit, and a multitude of well-documented examples of where things can go wrong when deposit regulations are relaxed too far (looking at you, GFC).

But when you break it down, there are also a multitude of reasons to prove that by the time long-term renters are reaching the point where they’ve been able to cobble together a 5 per cent deposit, they should be let in the front door and allowed to make themselves comfortable.

Victoria Devine is an award-winning retired financial adviser, bestselling author and host of Australia’s No.1 finance podcast, She’s on the Money. She is also founder and director of Zella Money.

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.

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