First Home Buyers at Risk of Negative Equity Under New Scheme

In a recent analysis by Eliza Owen, the head of research at Cotality, concerns have been raised about the potential financial consequences for first-home buyers under the Albanese government's new 5% deposit scheme.

This scheme, known as the First Home Guarantee, allows buyers to purchase property with just a 5% deposit, with the government covering a 15% mortgage guarantee.

Owen's insights highlight the financial impact of this initiative, particularly regarding the added cost of interest and the risk of negative equity.

Under this scheme, buyers of median-priced homes, valued at $848,858, could end up paying over $130,000 in additional interest over the life of a 30-year loan, based on a 5.5% per annum average mortgage rate. However, there is a potential upside for early market entrants, as they may benefit from reduced rental expenses. Owen highlights the substantial savings in Sydney, where the 5% deposit requirement could shorten the deposit-saving period by six years and reduce rental costs, currently averaging $801 per week, by about $251,000.

The scheme's expansion is expected to initially drive up demand, leading to a temporary rise in property prices. As Owen explains, this demand-side stimulus, coupled with interest rate decreases and constrained housing supply, could push home values to the scheme's threshold. While early participants may successfully navigate market entry hurdles, future buyers might face a more inflated market, acquiring homes with smaller deposits and enlarged mortgages.

Such dynamics raise the spectre of negative equity, particularly if house prices experience significant downturns. Past experiences in comparable markets, such as New Zealand and Canada, where house prices have fallen by more than 15% from peak levels, suggest that Australian buyers could encounter similar challenges. This scenario would not only affect individual homeowners but also the broader financial system, given the government's 15% mortgage guarantee, which could amass substantial contingent liabilities for Australian taxpayers.

Published:Thursday, 2nd Oct 2025
Source: Paige Estritori

Share this news item:

Finance News

Essential Tips for Successfully Securing a Jet Ski Loan in Australia

10 Oct 2025: Paige Estritori

Acquiring a jet ski is an exciting prospect, but securing the necessary financing requires careful planning and understanding of the loan process. Here are essential tips to enhance your chances of obtaining a jet ski loan in Australia. - read more

Click for more Finance News

Jet Ski Loans Articles

Jetski Essentials: The Safety Must-Haves for Every Aussie Rider

Safety on the water is paramount, and as thrilling as jet skiing can be, it is essential to recognize the risks involved and the importance of being well-prepared. When we talk about jetski safety, it isn't just about compliance with laws and regulations—it's about ensuring that every ride is as safe as it is enjoyable. Understanding the importance of safety on the water is the first step to becoming a responsible jetski operator. - read more

Beyond the Purchase Price: Unexpected Costs of Owning a Jet Ski

Welcome to our deep dive into the unexpected costs of owning a jet ski. While the thrill of skimming across the water on a sunny day is undeniable, it's important to be aware of the hidden expenses that come with owning such a high-adrenaline watercraft. - read more

Navigating Your Jet Ski Loan Options: Expert Advice for Watersport Enthusiasts

Embarking on the watersport lifestyle can be a thrilling experience, but jet skis, with their cutting-edge features and high-performance capabilities, come with a price tag to match. For many enthusiasts, financing is a practical method to spread out the cost of a jet ski purchase over time, making it more accessible and manageable. - read more

The Jet Ski Owner's Annual Checklist: Maintenance Edition

Welcome to the world of jet skiing - an exhilarating sport where the splash of water and the thrill of speed combine to offer an unforgettable experience. As a jet ski owner, you know that there's nothing quite like the freedom of gliding over the waves on a sunny day. But to keep the excitement alive, there's an essential aspect we must always remember: the importance of annual jet ski maintenance. - read more

Tips for Finding Affordable Jetski Financing in Australia

Welcome to our comprehensive guide on jetski financing in Australia. If you're dreaming of cutting through the waves on a shiny new jetski, you're not alone. Jetskis have seen a growing popularity in Australia, offering thrilling adventures and unforgettable moments on the water. - read more

Knowledgebase

Interest-Only Loan:
A type of loan where the borrower only pays the interest on the principal balance for a set term.

This website is owned and operated by Clark Family Pty Ltd (as Trustee for the Clark Family Trust) 43 Larch Street Tallebudgera QLD 4228, A.C.N. 010281008, Australian Credit Representative Number 401491 of Saccasan Pty Ltd, Australian Credit License 386297. Visit the ASIC website for additional licensing information.

IMPORTANT: We are neither authorised nor licensed to provide finance or financial products and we do not offer any form of credit or other financial advice. All product enquiries and requests for financial and/or other advice on this website are referred to third party intermediaries, insurers and lenders - with whom you can then deal directly. We may receive a fee or commission from these third parties in consideration for the referral. Before any action is taken to obtain a product or service referred to by this website, advice should be obtained (from either the third party to whom we refer you or from another qualified intermediary) as to the appropriateness of obtaining those products having regard to your objectives, financial situation and needs. Whilst we have our own process for vaidating the legitimacy of our referral partners, you should always verify the credentials of your financial adviser before proceeding with recommendations that they may present. Visit the ASIC website for further information.

First Home Buyers at Risk of Negative Equity Under New Scheme

First Home Buyers at Risk of Negative Equity Under New Scheme

Share this news item:

START HERE.