High-Income Buyers Crowd Into the 5% Deposit Scheme — What to Do If You Miss Out

New figures reported by The Adviser on 8 July 2026 reveal that a sizeable slice of the federal government's 5 per cent deposit guarantee is now being taken up by high-income borrowers. Since income caps were lifted under the expanded Home Guarantee Scheme, buyers on well-above-average salaries have flooded in — meaning first home buyers on ordinary incomes now face far more competition for both scheme places and entry-level properties.

What Changed

The 5% Deposit Scheme allows eligible first home buyers to purchase with as little as a 5 per cent deposit, with the government guaranteeing the balance so no Lenders Mortgage Insurance (LMI) is payable. When the scheme was expanded, income caps were removed and property price caps lifted — a deliberate move to widen access.

The side effect is now visible in the data: higher-income households, who could arguably have saved a larger deposit or absorbed LMI, are using the guarantee in significant numbers. With Australia's CPI still running at 4.0 per cent annually (ABS, May 2026) and the RBA cash rate held at 4.35 per cent, the appeal of buying sooner with a smaller deposit is obvious — for everyone.

Why It Matters for Ordinary Buyers

• More competition at the entry level. High-income scheme users tend to bid at the top of the eligible price bracket, putting upward pressure on exactly the properties modest-income buyers target.
• Scheme places are not unlimited in practice. Popular lenders on the panel can be slow to process guarantee applications during demand spikes.
• Not everyone fits the scheme's box. Self-employed applicants with less conventional income documentation often find mainstream scheme lenders difficult, even when they technically qualify.

If You Miss Out: The Non-Bank Path

At MPFG Capital, we regularly work with buyers who sit outside the scheme — self-employed applicants, new migrants and PR holders, or buyers whose target property exceeds the price caps. Options worth understanding include:

• High-LVR loans with LMI — recent market data shows low-deposit lending at record levels as lender competition heats up, and LMI premiums can often be capitalised into the loan.
• Alt Doc loans — for self-employed buyers who can verify income through BAS statements or an accountant's letter rather than payslips.
• Family guarantee structures — using equity in a family member's property in place of a cash deposit.

MPFG's View

The scheme remains genuinely valuable for those who secure a place. But the crowding effect is a reminder that government programs are one path to ownership, not the only one. A borrower who is declined by a scheme lender, or priced out of the eligible bracket, is not out of options — non-bank lenders assess income and deposit sources with more flexibility than the scheme's standardised criteria allow.

This article is general information only and does not constitute credit or financial advice. Lending criteria, terms and conditions apply. Consider your circumstances and seek professional advice before acting. MPFG Capital Pty Ltd — Australian Credit Licence 553698.