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ScoMo and Shorten go guarantor for first home buyers

ScoMo and Shorten go guarantor for first home buyers

The government is set to take over the role of guarantor by helping some first home buyers get into the market with as little as a 5 per cent deposit.

RateCity.com.auanalysis shows it could slash the time taken to save for a deposit by over five years for people living in Sydney. But it could also cost many first home buyers tens of thousands more in interest charges over the life of the loan.

“Yesterday, Scott Morrison handed first home buyers a reason to vote for him, without alienating existing home owners,” said RateCity research director Sally Tindall.

“The scheme helps first home buyers avoid costly lenders mortgage insurance, which is a win for people trying to scrape together a deposit.

“But first home buyers should be cautious about signing up to a 30-year mortgage with a wafer-thin deposit.

“If they do, they’ll be making higher monthly repayments and shelling out thousands more in interest to the bank over the life of the loan.

“APRA has spent the last four years telling the banks to be cautious of lending to Australians with low deposits. Now the major political parties are actively encouraging it.

“Don’t rely on the government to tell how much you can borrow. Do the maths yourself, taking into account things like extra interest versus not having to pay rent or lenders mortgage insurance, and work out whether a 5 per cent deposit is a good idea for your financial future. You may find you’re worse off in the long run,” she said. 

Paying down the mortgage: the real cost of a 5 per cent deposit

5% deposit

20% deposit


Deposit amount




Loan size




Monthly repayments




Total paid over 30 years




Interest paid over 30 years




Notes: based on a $500K property and assumes total amount borrowed is paid back to the lender at an average interest rate of 4.31% for an owner occupier paying principal and interest repayments. Does not factor in stamp duty. Assumes LMI is $0.

Time taken to save for a deposit


Median dwelling price

Deposit 20%

Deposit 5%

Time taken to save for a 20% deposit

Time taken to save for a 5% deposit





7 years

1 year, 10 mths





5 years 8 mths

1 year, 6 mths





4 years 5 mths

1 year 2 mths





4 years

1 year





4 years, 1 mth

1 year 1 mth





4 years 2 mths

1 year 1 mth





3 years 7 mths

11 mths





5 years 5 mths

1 year, 5 mths

Notes: Assumes someone is saving $400 a week in a savings account offering 2% interest. Does not factor in stamp duty or other FHB concessions. Calculations are rounded to the nearest month. Dwelling prices are from CoreLogic May 2019.

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This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.



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