Sunrise host confronts housing minister over five per cent deposit scheme

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  Published in House and Home on Tue, Sep 9th, 2025 by 7NEWS

First‑home borrowers warned as the government pushes 5‑per‑cent deposits

In a rare public confrontation, property commentator Nat Barr took to the media to slam Finance Minister Clare O’Neil’s plans to lower the minimum deposit required for first‑home buyers. Barr, who has long been a vocal critic of government housing policy, said the 5‑per‑cent deposit that is currently in place will only push house prices higher and that the Australian government needs to “wake up” before a bubble forms.

Barr’s remarks came after the federal government announced a “deposit guarantee scheme” designed to help 1.5 million Australians buy their first homes. The scheme would allow banks to guarantee up to 50 % of the deposit, thereby reducing the amount buyers need to save. While the government touts the policy as a means of making the housing market more inclusive, Barr argues it does the opposite.

“What the government is doing is feeding the house‑price engine,” Barr told 7 News. “Lowering the deposit means more borrowers will get a loan, which will push prices even higher. It’s a classic bubble‑creation formula.”

Why 5 percent is already problematic

Barr highlighted data from the Australian Bureau of Statistics and the Australian Housing Association, noting that the median house price in Sydney and Melbourne has risen at a pace far outstripping wage growth. With interest rates still on the rise, buyers are facing a steep climb to afford a deposit. Barr argues that the 5‑per‑cent requirement, while a step down from the 10‑per‑cent rule that was in force before 2017, is still too low for the current market.

He pointed to a recent Reserve Bank of Australia (RBA) review that cautioned against “over‑leveraging” in the residential sector. The RBA noted that while the deposit guarantee scheme would ease short‑term pressure on the market, it would also increase systemic risk by encouraging banks to extend credit to risk‑averse borrowers.

Minister Clare O’Neil’s response

Finance Minister Clare O’Neil defended the policy as a necessary measure to keep first‑home affordability within reach. In a statement to 7 News, O’Neil said the scheme had undergone “rigorous risk assessment” and that the government would be “monitoring the impacts closely.” She added that the deposit guarantee would be capped at 50 % of the deposit, thereby limiting the exposure of the banking system.

“The aim is to give people the opportunity to own a home without sacrificing financial stability,” O’Neil said. “The government is committed to ensuring that the housing market remains resilient.”

Broader implications for the housing market

Barr’s critique has reignited a debate that has been raging in Australian media for months. Analysts from the Housing Industry Association (HIA) have noted that while lowering deposits can help buyers enter the market, it also tends to inflate prices. In a related article on 7 News, HIA’s chief economist said the deposit guarantee scheme would “create a new layer of demand that could push prices beyond sustainable levels.”

The policy also faces criticism from consumer advocates. The Australian Consumer Rights Foundation (ACRF) warned that the scheme could lead to higher default rates, especially among young, first‑time buyers who might over‑extend themselves.

What comes next?

The government is scheduled to present a detailed report on the deposit guarantee scheme to the Senate later this month. Barr has pledged to keep the conversation going, urging lawmakers to reconsider the deposit threshold. He argues that the 5‑per‑cent requirement should remain in place, or at least be accompanied by strict lending criteria and consumer education programs.

In the end, the debate reflects a broader tension in Australian housing policy: how to balance affordability with the need to maintain a stable and sustainable market. Whether the government will adjust its strategy in response to Barr’s warnings remains to be seen, but one thing is clear—stakeholders across the board are watching closely, as the outcome will have lasting implications for the next generation of Australians looking to purchase their first home.