Buying Made Easier? Behind the 5% Deposit Scheme, Banks Tighten the Rules — Sydney Auction Clearance Rate at 74%

Week’s Key Focus

Starting from last Wednesday, the Australian Government officially brought forward the expanded First Home Guarantee scheme, allowing more buyers to enter the market with just a 5% deposit and no Lenders Mortgage Insurance (LMI). The policy has removed income and regional restrictions and significantly raised property price caps — up to $1.5 million in Sydney, and $1 million and $950,000 in Brisbane and Melbourne respectively. However, amid the “buying rush,” experts warn that a rejected 95% loan application can hurt more than just your property plans — it may also damage your credit score, making future loan approvals harder.

While the 5% deposit has greatly lowered the entry barrier for first-home buyers, securing loan approval still requires meeting the banks’ strict lending standards. In Sydney, for example, a first-home buyer could theoretically borrow up to $1.425 million, but in practice, this is almost impossible unless it’s a dual-income household. The government’s website also notes: “Eligibility does not guarantee approval.” Experts say the new scheme has boosted market sentiment but not addressed the underlying issue of limited housing supply, warning that “without more stock, prices will only continue to rise.”

To improve approval chances, financial advisors suggest three key steps.
First, check your credit score and correct any errors immediately.
Second, reduce your credit card limit, as every $10,000 of limit may cut your borrowing capacity by up to $70,000.
Third, control discretionary spending — lenders now review the past three months of bank statements, and frequent expenses such as streaming subscriptions, rideshare, entertainment, or beauty services can affect assessments. Showing three months of “financial discipline” can significantly improve approval odds.

With FOMO (fear of missing out) spreading across the market, many buyers are rushing to secure properties before October 1 — some even making offers sight unseen. Yet mortgage experts caution that one loan rejection can harm your credit and future opportunities. Buyers are urged to stay calm, set realistic budgets, and apply only when fully prepared. “Don’t let short-term incentives damage your long-term financial health,” one advisor said. “The smartest buyers aren’t the first to rush in — they’re the ones who prepare best.”

NORWEST SYDNEY

Auction Results Last Week

Sydney: 749 properties were scheduled for auction, with results reported for 493. A total of 363 properties were sold, achieving a clearance rate of 74%, with a total auction value of AUD 406,399,795 and a median house price of AUD 1,550,000.
Melbourne: 1,074 properties were scheduled for auction, with results reported for 813. A total of 569 properties were sold, resulting in a clearance rate of 70%, with a total auction value of AUD 439,890,288 and a median house price of AUD 886,500.