5% Deposit Scheme: 208,000 Buyers, Only 13 Defaults

New Senate estimates data reveals Australia's 5% Deposit Scheme has a near-zero default rate, though critics say it has drifted from its original intent.

When the federal government's Home Guarantee Scheme launched in 2020, it promised to help Australians buy a home with just a 5% deposit — with no lenders mortgage insurance required. Six years and 208,000 guarantees later, the government has released hard data on how the scheme has actually performed. The numbers tell a broadly reassuring story, with some genuine complexity around who is now benefiting.

The Default Numbers Are Extraordinary

The Adviser reports that in answers to Senate estimates questions on notice, Housing Australia confirmed that from the scheme's launch in 2020 to May 2026, it issued around 208,000 guarantees to help people buy or build a home.

The default performance has been remarkable. Across the full life of the scheme, the government has had to meet just 13 default claims, at a total cost of $604,537. Across a portfolio of 208,000 guarantees, that is a default-claim rate of approximately 0.006%.

Of the roughly 207,000 guarantees issued to that point, 1,392 had fallen more than 90 days behind on repayments, with 436 still in arrears in May 2026. For context, that arrears rate sits at around 0.7% — notable for a low-deposit lending program operating through a period of three consecutive RBA rate hikes that pushed the cash rate to 4.35%.

The post-expansion numbers are even stronger. Of the 45,300 homes bought through the scheme since the October 2025 expansion, just two households were in arrears as of May. Since that expansion, the scheme has been supporting around 5,670 loans per month, up from around 3,400 per month the year before.

ABS data shows first home buyers overall taking out approximately 10,181 loans per month — meaning a majority of new first home buyers are now entering the market via a government guarantee. The overall repayment performance confirms that: 89% of scheme participants are currently ahead on their mortgage repayments.

Who Is Using the Scheme — and the Ongoing Debate

The headline conversion figure — the number most closely watched by critics — is the proportion of scheme properties that have been switched from primary residences into investment properties: 1,485 out of roughly 208,000 guarantees, or around 0.7%.

Converting is allowed, but only within a defined framework. Borrowers must live in the property for at least 12 months, avoid immediately renting it out, notify their lender of the intention to convert, and formally request a change in loan purpose.

What happens next depends on the loan-to-value ratio at the time. If the LVR remains above 80%, the borrower loses the government safety net and must pay lenders mortgage insurance — either upfront or capitalised into the loan balance — and the interest rate moves to investor pricing. Where the borrower has reduced the debt or the property has appreciated enough to bring the LVR below 80%, the transition is more straightforward.

The government's position, as stated by a spokesperson for Housing Minister Claire O'Neil, is that once a participant transitions out of the scheme, that choice belongs to them: "When a participant transitions out of the scheme, and the government is no longer guaranteeing their mortgage, the owner is entitled to decide what they do with their home."

Greens housing spokesperson Barbara Pocock has pushed back, arguing the scheme "was supposed to help first home buyers on lower incomes to get a roof over their heads. It shouldn't benefit the wealthy and property investors."

Those concerns intensified after October 2025, when the government removed income caps, scrapped annual place limits, and lifted property price caps. Between October 2025 and April 2026, the program backed nearly 40,000 loans. Of those, 13,979 went to borrowers above the previous income thresholds — about one in three. Nearly 1,000 singles earning at least $200,000 and 1,251 couples earning $275,000 or more accessed the scheme over that six-month window.

The broader scheme profile, however, still tilts toward its original intent. As of March 2026 data, more than 300,000 Australians had bought or built a home with guarantee support. Around 60,000 essential workers — including teachers, nurses, and emergency services staff — have used the scheme. More than 99,000 participants live in regional Australia, approximately 6,000 are single women with dependants, and roughly half of all supported buyers are under 30.

What This Means If You Are Considering the Scheme

If you are a first home buyer working out whether the scheme suits your situation, the performance data tells a positive story about real-world outcomes. The government's financial exposure has remained minimal, and participant repayment rates are strong — even through a rising rate environment.

The scheme now covers a wider range of borrowers and properties than when it launched. Whether or not the income cap removal was the right policy call is a political question — but the practical effect for buyers is that the scheme is more accessible than at any point in its history.

If you are exploring your options, the first home buyer hub covers products available under the scheme alongside the broader lender market.

Before you apply, it is also worth running the LMI calculator to understand what lenders mortgage insurance would cost you outside the scheme. If you are borrowing at an LVR above 80% without a government guarantee, LMI is the alternative — and understanding that cost helps you weigh the scheme's value accurately.

The Senate data makes one thing clear above all: for most borrowers, the 5% Deposit Scheme has delivered what it promised. The loan performance is strong, the cost to taxpayers has been minimal, and the pathway to ownership has been real for hundreds of thousands of Australians.