New figures have revealed how many homes secured through the 5 per cent Deposit Scheme have been turned into investment properties.
Fresh data from Housing Australia has confirmed that a small share of homes purchased under the federal government’s 5 per cent Deposit Scheme have been converted into investments.
In answers to Senate estimates questions on notice, Housing Australia revealed that from the scheme’s launch in 2020 to May 2026, it had issued about 208,000 guarantees to help people buy or build a home.
Over that period, 1,485 properties bought with the support of a guarantee were released from the scheme after being converted into investment properties – around 0.7 per cent of all guarantees.
Converting a property purchased with a 5 per cent deposit loan is allowed under the scheme, but only within a defined framework.
Borrowers must first meet residency requirements by living in the property for at least 12 months, avoid renting it out immediately, then inform their lender of an intention to lease the home, and request a formal change to the loan’s purpose.
Once the home is treated as an investment, the loan needs to shift onto investor settings, with either the government guarantee forfeited or the loan refinanced using accrued equity.
If the loan‑to‑value ratio (LVR) remains above 80 per cent at that point, the borrower loses the government safety net and must pay lenders mortgage insurance (LMI), either upfront or by capitalising it into the loan balance, and the interest rate moves to investor pricing.
Where the borrower has reduced the debt or the property value has risen so that LVR is below 80 per cent, the transition to an investment loan is fairly seamless.
When asked about 5 per cent Deposit Scheme borrowers who later rent out their homes, a spokesperson for Housing Minister Claire O’Neil said the scheme did not seek to control how participants use their property once the government safety net expires.
“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,” the spokesperson said.
Criticism over investor and high‑income use
Greens housing spokesperson Barbara Pocock said the program was designed to get first home buyers (FHBs) into housing rather than help build investment portfolios.
She said 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 have intensified since 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 – 15,924 single‑borrower and 23,790 joint‑borrower loans – with 13,979 of those going 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.
Housing Australia data released in March showed more than 300,000 Australians had bought or built a home with support from the guarantees.
Almost 60,000 essential workers – including teachers, nurses, and emergency services staff – have used the scheme, while more than 99,000 participants live in regional Australia.
About 6,000 single women with dependants have secured housing through the scheme, and roughly half of all supported buyers are under 30.
Majority of borrowers ahead, defaults minimal
Alongside the investor conversion numbers, Housing Australia’s responses also provided a look at loan performance under the scheme.
The figures showed that 89 per cent of participant borrowers are ahead on their repayments.
Since the program began, 1,392 guarantees out of roughly 207,000 have fallen more than 90 days behind on their loans, and 436 of those were still in arrears in May.
Of the 45,300 homes bought under the 5 per cent deposit program from its October 2025 expansion up to May, just two households were in arrears, a separate answer showed.
Across the life of the scheme, the government has only had to meet 13 default claims, at a total cost of $604,537, with most of those losses eventuating in the past 12 months.
Since the expansion, the scheme has supported around 5,670 loans a month, up from 3,400 a month the year before.
Over the same period, ABS data showed FHBs overall taking out about 10,181 loans a month, implying that a majority of new FHBs now enter the market via the government guarantee.
[Related: First non-bank joins 5% Deposit Scheme]
Want to see more stories from trusted news sources?
Make The Adviser a preferred news source on Google.
Click here to add The Adviser as a preferred news source.
