Low‑deposit mortgages have jumped to record levels after the Home Guarantee Scheme was uncapped, reshaping the flow of new housing.
The latest Australian Prudential Regulation Authority (APRA) property exposure statistics for the December quarter have revealed that banks approved a record wave of loans to buyers putting down deposits of 5 per cent or less.
Banks wrote $5.4 billion in new owner‑occupier loans, with deposits of 5 per cent or less in the three months to December, an increase of $2.1 billion, or 63 per cent, on the previous quarter.
This is the sharpest rise since APRA began publishing the series in 2019.
These loans, largely driven by first home buyers, now make up 4 per cent of all new owner‑occupier mortgages, the highest proportion on record.
The development coincides with the federal government’s decision to expand the Home Guarantee Scheme from 1 October by removing caps on both the number of places and the income thresholds for eligible borrowers, significantly widening the pool of potential participants.
First home buyers jump at 5% deposits
The figures suggest that the uncapping of the scheme has translated into demand from entry‑level buyers who previously struggled to save a traditional 20 per cent deposit.
Canstar data insights director Sally Tindall said the scheme had dismantled one of the toughest hurdles for aspiring owners.
“The Home Guarantee Scheme has removed a key barrier for first home buyers who have surged on to the market, wafer‑thin deposits in hand,” she said.
Tindall said stretched affordability and rapid price growth had made large deposits increasingly unrealistic for many households and helped explain why the 5 per cent option had been rapidly embraced.
“Saving a 20 per cent deposit had become an almost impossible task for many would‑be buyers,” she said.
“This latest APRA data confirms new borrowers are now jumping at the option of a 5 per cent deposit loan.”
Record lending alongside rising investor appetite
The low‑deposit surge has unfolded against a backdrop of record overall mortgage activity.
Total new home loans reached $211.9 billion in the December quarter, the highest level on APRA’s records, with owner‑occupier lending posting a 12.1 per cent quarterly rise, helped by the influx of first home buyers.
However, on an annual basis, investors remained the fastest-growing segment, with new investor lending increasing by 25 per cent over the year.
That investor‑led lift is central to APRA’s risk calculus.
The regulator has repeatedly flagged that highly geared investors are more likely to fall into the high debt‑to‑income (DTI) category and could amplify housing cycles when prices and rents move abruptly.
APRA’s latest data show new lending with a DTI of six times or more rose by $2.8 billion over the quarter and now accounts for 6.8 per cent of all new owner‑occupier and investor loans, up from 5.5 per cent six months earlier.
While high‑DTI lending is rising, it is still well below both APRA’s new ceiling and the high extremes seen in 2021.
In November 2025, the regulator confirmed it would introduce a 20 per cent cap on new loans written at DTI ratios of six times or more, applied separately to owner‑occupier and investor books, with the measure taking effect from 1 February.
Tindall said both the recent lift in high‑DTI lending and the sharp acceleration in investor activity were key reasons why APRA had moved earlier in the cycle.
“These loans now make up 4 per cent of new owner‑occupier lending, which sounds small, but is actually the highest proportion on record,” she said of the low‑deposit cohort.
“This won’t have passed the regulator by.”
Offset buffers hit new highs
On the other side of household balance sheets, borrowers continue to build large cash cushions inside their mortgages.
Funds held in offset accounts climbed to a record $343.5 billion in the December quarter, after households tipped an additional $16.2 billion into these accounts over just three months.
Offsets now represent 12.3 per cent of total mortgage credit limits across authorised deposit‑taking institutions, up from 11.9 per cent in the September quarter.
[Related: Grants for first home buyers driving up prices and debt]
