First non-bank joins 5% Deposit Scheme

Liberty Financial is widely known for its focus on borrowers who sit outside standard bank credit boxes, including self‑employed clients, borrowers with non‑traditional income streams, and customers with more complex structures.

It operates across home loans, motor finance, and commercial property lending.

The move brings an alternative credit provider into a scheme that now underpins a majority of first home buyer (FHB) loans.

Liberty Financial's general manager – residential, Caesar Ibrahim, said the lenders decision to join the scheme reflected its focus on accessibility and alternative credit.

“We know saving a full deposit can be one of the biggest barriers for aspiring home buyers. By joining the government’s 5% deposit scheme, we can help more customers move forward sooner,” he said.

Ibrahim also outlined Liberty’s willingness to look beyond conventional income and employment patterns.

“At Liberty, we take a flexible approach to lending and look beyond standard criteria. Our participation in the scheme allows us to support more customers with solutions that reflect their individual circumstances,” he noted.

“This is an important milestone not just for Liberty, but for the role non-bank lenders can play in expanding access to government-backed initiatives.

“Brokers will continue to play an important role in helping customers understand their options and determine whether the scheme is suitable for their needs.”

Housing Australia stressed that Liberty’s appointment followed a formal and tightly managed selection process.

“The appointment of Liberty followed a competitive Request for Proposal process to expand the panel of lenders participating in the Australian Government 5% Deposit Scheme,” Housing Australia told The Adviser.

“All Participating Lenders must meet the same comprehensive Scheme requirements, including serviceability, verification, reporting and audit obligations.”

It also made clear that adding a specialist non‑bank would bolster competition and choice and allow more borrowers to partake in the scheme.

“The addition of Liberty provides eligible home buyers with greater choice and access to the Scheme while maintaining the same safeguards and standards and consumer protections that apply across the Scheme,” Housing Australia said.

“Expanding the lender panel helps improve accessibility to the Scheme and supports more Australians on their pathway to home ownership.”

The 5 per cent Deposit Scheme – an expanded evolution of the Home Guarantee Scheme – allows eligible FHBs to purchase with a deposit as low as 5 per cent and single parents or legal guardians with as little as 2 per cent, without paying lenders mortgage insurance.

The government provides a guarantee that covers the gap between the borrower’s deposit and the usual 20 per cent equity buffer.

On 1 October 2025, income caps were removed, annual place limits were scrapped, and property price caps were lifted.

Housing Australia said in March that more than 300,000 Australians had bought or built a home with support from the guarantee.

Almost 60,000 essential workers – including teachers, nurses, and emergency services staff – have used the scheme, over 99,000 participants live in regional Australia, about 6,000 single women with dependants have secured homes through the program, and roughly half of all supported buyers are under 30.

Between October and April alone, the expanded scheme backed nearly 40,000 loans – 15,924 single‑borrower and 23,790 joint‑borrower loans – with 13,979 of these going to borrowers above the previous income thresholds.

Nearly 1,000 singles on salaries of at least $200,000 and 1,251 couples earning $275,000 or more accessed the guarantee in that period.

Since its expansion, the scheme has supported 5,670 loans a month, while ABS data over the same period showed FHBs overall taking out about 10,181 loans a month, indicating that the majority of FHBs now enter the market through the scheme.

Lender panel now spans majors, mutuals – and a non‑bank

Liberty’s inclusion comes as the lender panel has been steadily widened.

All four major banks participate in the program, following Australia and New Zealand Banking Group’s decision in March to join the scheme.

More than 30 smaller, regional, and customer‑owned institutions – such as Bendigo Bank, Bank Australia, and various credit unions and mutuals – also offer guaranteed loans.

However, the surge in demand created by the expansion has put pressure on processing times.

Housing Australia has publicly called for more lenders to join the panel – and to sign up for the separate Help to Buy program.

Beyond Bank, for example, temporarily paused its acceptance of pre‑approvals late last year after a surge in applications under the scheme.

The scheme itself has already altered market behaviour.

Recent Equifax Trends & Insights data has shown that inquiries from FHBs aged 18–25 rose 22.8 per cent since the expansion, the fastest‑growing age group in its analysis, while requests for credit from first‑timers aged 26–35 and 36–45 climbed by 17.4 and 16 per cent, respectively.

Price pressures at the lower end

Economists, including those at data firm Cotality, have warned that the expanded guarantee is supercharging demand in the more affordable segments of the market.

Analysis from Cotality has revealed that since the October changes, homes sitting under the new price caps have recorded markedly faster price gains than higher‑priced properties, with under‑cap markets outperforming across almost nine in 10 regions.

[Related: High-income borrowers crowd into 5% Deposit Scheme]