The 5% Deposit Scheme Cleared 102,594 Buyers in Its First Expanded Year. First Home Buyer Mortgage Demand Still Fell 20.1%

Two numbers published within a fortnight of each other describe the same first home buyer market and point in opposite directions. The first is 102,594: the number of first home buyers the Commonwealth says used the expanded 5% Deposit Scheme in the twelve months from 1 October 2025. The second is 20.1%: the year-on-year fall in first home buyer mortgage demand that Equifax recorded for August 2026.

Both can be true at once, and the reason they are both true is the most useful thing a broker can take from either of them. The scheme has become very good at solving the problem it was designed to solve. That problem is no longer the one stopping most first home buyer files from settling.

What the first-year release actually says

The source is a joint media release issued on 1 October 2026 by the Hon Anthony Albanese MP, Prime Minister, and the Hon Clare O’Neil MP, Minister for Housing, Homelessness and Cities. Its headline claim is that more than 100,000 first home buyers have used the expanded scheme in its first year; the state-by-state table in the release totals 102,594.

The release also reports:

• More than 280,000 Australians supported into a home since 2022;
• $2.5 billion in lenders mortgage insurance savings under this government, including $1.4 billion in the past year;
• An estimated saving of around $23,700 for a first home buyer purchasing a national median-priced home with a 5% deposit;
• 99% of scheme borrowers ahead of or on track with their repayments;
• 13 claims paid since the scheme launched;
• An average of 2.5 years on the scheme before a borrower exits.

Two of those figures deserve more attention from brokers than they have had. The 99% on-track figure and the 13 claims paid are the Commonwealth’s own answer to the objection brokers hear most often about high loan-to-value first home buyer lending: that a 5% deposit book is a fragile book. On the government’s reported numbers, it has not behaved like one to date. That is a reportable data point for a nervous client or a cautious referral partner — though it describes a book written largely through a different rate cycle, and it says nothing about how any individual file will perform.

The gate moved, and the Commonwealth says so itself

Treasury’s own description of the scheme is the cleanest evidence that the eligibility screen has largely gone. On Treasury’s account, from 1 October 2025 income caps were removed, places became uncapped, and property price caps were increased under all streams. The scheme runs a standard stream requiring a deposit as low as 5%, and a single-parent and legal-guardian stream requiring as little as 2%.

Read that as a broker rather than as a policy analyst. The questions that used to decide whether the scheme was even on the table — is the client under the income cap, are there places left this financial year, is the purchase under a cap set a cycle ago — have mostly stopped being decisive. For a first home buyer client, scheme eligibility is now close to a default rather than a hurdle.

What replaced it

On 29 September 2026 the Reserve Bank’s Monetary Policy Board raised the cash rate target by 25 basis points to 4.60%, the fourth increase of 2026. The Board’s statement said inflation “remains elevated and some of the upside risks flagged in August are materialising”, that “a further tightening in financial conditions is warranted to support a return of inflation to target”, and that it would continue to do what it considered necessary “including increasing the cash rate target further if needed”.

The demand data had already turned. Equifax’s figures for August 2026, reported by Savings.com.au on 18 September, showed first home buyer mortgage demand down 20.1% year-on-year, against a 14.1% fall in overall mortgage demand. The fall was sharper among younger cohorts — down 21.7% for 18 to 25 year-olds and 18.1% for 26 to 35 year-olds — and sharper again in Queensland and New South Wales, at 22.6% and 22% respectively.

So the first home buyer cohort shrank fastest, in the age brackets most likely to be first home buyers, while the scheme built for them recorded its biggest year. The scheme is not failing to attract the buyers who can still transact. There are simply fewer of them, and the reason is servicing, not deposit.

The price cap is now mostly theoretical — and that is the point

The lifted caps are generous. NAB’s published scheme fact sheet, effective 1 July 2026, lists a cap of $1.5 million for capital city and regional centre purchases in New South Wales and $800,000 for the rest of the state, $950,000 and $650,000 in Victoria, and $1 million and $700,000 in Queensland.

A $1.5 million cap is not a constraint on a single first home buyer in Sydney. It is a number they will never approach. The binding constraint is the loan a lender will actually approve at a 4.60% cash rate, and that is a smaller number than it was at the start of the year.

This inverts the old conversation. Brokers used to work downward from the cap: here is what the scheme allows, let us see whether your borrowing power reaches it. The useful order now is the reverse. Establish the serviceable loan amount first, then ask whether the scheme improves the client’s position at that amount.

The panel constraint brokers keep discovering late

The scheme is only available through lenders Housing Australia has authorised. The published panel on the Commonwealth’s first home buyers site is broad — the four majors, St George, BankSA and Bank of Melbourne, Bendigo, Newcastle Permanent, Great Southern Bank, People First Bank and a long list of mutual and customer-owned banks — but it is overwhelmingly a bank and mutual panel. Liberty is the most prominent non-bank name on it.

For brokers, that is a real placement question rather than a footnote. If the capacity answer for a particular client sits with a non-bank, a specialist or a lender whose servicing calculator treats their income type more generously, and that lender is not on the panel, then the scheme and the best capacity outcome are not available in the same application. That trade-off has to be worked out before the client is told which structure they are using, not after a decline.

The decision framework for the next FHB file

The practical shift is small and it sits early in the process. Run the capacity assessment before the scheme conversation, then test the scheme against the alternatives at the amount the client can actually borrow.

1. Establish the serviceable amount first. Across the lenders you would realistically place the file with, not a single calculator. This number, not the cap, is the shape of the file.
2. Price the alternatives at that amount. A scheme loan avoids the LMI premium. An LMI-paid loan at a lower rate, a lender with a capitalised premium, a family guarantee structure, or a smaller purchase with a larger deposit may all produce a better total cost or a better approval probability for a given client. The $23,700 figure in the release is an estimate at the national median — it is not the saving on every file.
3. Confirm the panel. Check that the lender giving the best outcome is authorised for the scheme before the structure is presented as settled.
4. Confirm the exact cap. By postcode, through the official tool, dated.
5. Record the comparison and the reason. Including why the structure you recommended was preferred to the ones you did not.

That last step is where the compliance exposure now sits. Best interests duty obligations apply to credit assistance provided to consumers under the National Consumer Credit Protection Act 2009, and ASIC’s guidance on the duty is directed at the substance of the recommendation rather than the presence of a product on a panel. When a scheme is available to nearly every client in a cohort, recommending it by default is the kind of step that is easy to take and hard to evidence afterwards. What the file needs is not a longer form but a recorded comparison: these were the options at this borrowing level, this is the one recommended, and this is why. Brokers should confirm how their own process meets the duty with their licensee or aggregator compliance team rather than relying on a general description of it.

What to watch next

• Whether the demand fall continues into the September and October data. The August Equifax reading predates the 29 September rate rise, so it does not yet contain that decision’s effect on enquiry.
• Any review of the caps. Caps that were lifted to reflect prices at a particular point sit differently once values and capacity both move.
• Panel additions. Each lender added changes the set of files where the scheme and the best capacity outcome can coexist.
• Scheme book performance in later reporting. The 99% on-track and 13-claims figures are the current reported position; whether they hold through a higher rate environment is the number worth tracking.

The takeaway

The expanded 5% Deposit Scheme has done what it was built to do, and the Commonwealth’s first-year numbers are a reasonable evidence base for saying so to a client. But a scheme that almost every first home buyer qualifies for has stopped being a differentiator and started being a baseline. The value a broker adds on a first home buyer file in October 2026 is not knowing the scheme exists. It is knowing the client’s real borrowing capacity first, knowing whether the scheme is genuinely the best structure at that number, knowing which lenders can deliver both, and having the comparison on the file when someone asks why.