Why more Australians are feeling the deposit squeeze and what options exist for home buyers in today’s market
When people talk about “home loan deposit challenges”, it’s easy to picture first-home buyers doing all the heavy lifting. But in today’s market, the challenge is far broader. At Indi Finance, we regularly meet people who are financially capable, forward-thinking and responsible with their money, yet still finding it hard to build the deposit needed to take their next step.
This isn’t a reflection of their discipline or borrowing strength.
It’s a reflection of the market Australians are navigating today.
A small deposit doesn’t mean someone isn’t a strong borrower.
A smaller deposit doesn’t necessarily mean someone isn’t financially ready to buy a home. In many cases, it reflects the reality that property prices have risen faster than many Australians can reasonably save.
Why Are Home Loan Deposit Challenges Increasing?
Across Melbourne and much of Australia, rising home values, increasing rental costs and higher everyday living expenses have made it more difficult for prospective buyers to build a deposit while managing their existing financial commitments. For many, the challenge isn’t demonstrating they can afford a home loan – it’s saving the upfront funds needed to enter the property market.
As a result, some buyers find themselves paying rent that is comparable to, or even higher than, potential mortgage repayments, yet still face delays in purchasing because of deposit requirements.
This is one reason why low-deposit home loan options and government support initiatives continue to play an important role in helping eligible buyers take their first step into the property market sooner.
Who’s Feeling the Deposit Pressure?
Much more than first-home buyers:
Separated or Divorced Buyers Starting Again
A separation can reset someone’s financial position overnight, even when their income and borrowing capacity remain solid.
Growing Families Aiming for More Space
Families with young children often rent while saving, but the cost of the next family-sized home continues to rise, making it difficult to stay ahead.
Upgraders Stuck Between Selling & Buying
Many homeowners want to move, but the timing can be challenging. If the market shifts quickly, the required deposit can suddenly increase.
High-Income Professionals Without High Savings
Earning well doesn’t automatically translate into large savings. Busy careers, lifestyle commitments and unexpected life events can all impact a person’s ability to accumulate a larger deposit.
Newer Australians Finding Their Feet
New citizens, permanent residents and couples where one partner is still on a bridging or partner visa can face unique deposit challenges, even when they have stable employment and reliable income.
Second-Time Buyers Managing Life’s Big Costs
Renovations. Weddings. School fees. Medical expenses.
Life happens, and even previous homeowners can find themselves short of the deposit required for their next purchase.
Investors Looking to Grow Their Portfolio
Some investors have strong income and a clear investment strategy but may not have the available equity or cash reserves needed in competitive markets.
In short, the deposit is often the roadblock – not the loan repayments.
Many Australians may be able to comfortably afford the mortgage… but it’s the upfront cash that’s the hurdle.
What Is Low Deposit Lending?
A low deposit home loan allows eligible borrowers to purchase a property with less than the traditional 20% deposit.
While many Australians believe they must save a full 20% before buying a home, this is a common misconception. Although a larger deposit can reduce borrowing costs and provide greater flexibility, it isn’t the only pathway available.
Depending on the lender, the property type and your financial circumstances, it may be possible to purchase a property with a significantly smaller deposit.
For borrowers with stable income, genuine savings and suitable borrowing capacity, low deposit lending can provide an opportunity to purchase sooner while continuing to build equity over time.
The Good News: Low-Deposit Lending Options Do Exist
Today’s lending market offers a wider range of solutions than many buyers realise.
Purchasing with a smaller deposit can help you enter the property market sooner, but it’s important to understand both the benefits and the trade-offs.
While these solutions won’t suit everyone, today’s lending environment does offer pathways that can reduce the upfront deposit required – sometimes significantly.
Eligible borrowers may be able to access:
✔️ 98% LVR for owner-occupiers
✔️ 98% LVR for investors
For the right person, particularly those with strong income and clear goals, these options can make it possible to enter (or re-enter) the market sooner than expected.
Understanding Loan-to-Value Ratio (LVR)
When discussing low deposit lending, you’ll often hear the term Loan-to-Value Ratio (LVR).
LVR is simply the percentage of a property’s value that you’re borrowing.
For example:
- Purchasing a $700,000 property
- Borrowing $686,000
- Contributing a $14,000 deposit
would result in a 98% LVR.
Generally speaking, the higher the LVR, the smaller the deposit required. However, higher-LVR loans usually have additional lending requirements and may involve costs such as Lenders Mortgage Insurance (LMI).
How Much Deposit Do You Need?
One of the most common questions borrowers ask is, “How much deposit do I need to buy a home?”
While a 20% deposit is often viewed as the traditional benchmark, the amount required will depend on the lender’s policies, the type of property being purchased and your overall financial position.
Understanding your options early can help you avoid spending years saving towards a deposit that may not actually be necessary for your circumstances.
It’s About Helping People with Goals and Aspirations
Every borrower has a story. A journey. A set of circumstances that led them to where they are today.
Most have worked incredibly hard to build what they’ve saved, but the pace of the market means that sometimes it still doesn’t feel like enough.
If you feel like you’ve done the hard work yet still can’t quite close the gap, you’re far from alone, and there may be more options available than you realise.
A conversation with a lending professional can help you understand what may be possible, compare lender policies and map out a strategy that supports your next step with confidence.
Things to Consider Before Choosing a Low Deposit Strategy
Purchasing with a smaller deposit can help you enter the property market sooner, but it’s important to understand both the benefits and the trade-offs.
Depending on the loan structure, you may need to consider:
- whether Lenders Mortgage Insurance (LMI) applies
- higher overall borrowing costs
- larger loan repayments compared with a larger deposit
- lender eligibility criteria
- your long-term financial goals
Choosing the right strategy isn’t simply about borrowing the maximum amount available. It’s about finding a solution that remains comfortable and sustainable over the long term.
Every Borrower’s Journey Is Different
One of the biggest misconceptions in today’s property market is that buyers who haven’t saved a large deposit simply haven’t tried hard enough.
In reality, many Australians have been saving consistently for years while balancing rising rents, increasing living costs and higher property prices.
A smaller deposit doesn’t necessarily indicate a weak borrower. Often, it reflects how quickly the market has changed.
Understanding your borrowing capacity, available lending options and potential government support may reveal opportunities you hadn’t previously considered.
How a Mortgage Broker Can Help
Navigating lender policies can be confusing, particularly when every bank has different deposit requirements and lending criteria
Working with an experienced mortgage broker in Melbourne can help you:
- understand your borrowing capacity
- compare lenders that offer low deposit home loans
- identify government assistance you may qualify for
- structure your finance to suit your long-term goals
- determine whether buying now or continuing to save is the better strategy
Rather than focusing solely on interest rates, a mortgage broker can help develop a lending strategy that aligns with your financial circumstances and future plans.
Ready to Explore Low-Deposit Strategies?
Whether you’re buying for the first time, upgrading, or building your investment portfolio, strategic lending can help close the gap between where you are now and the home you’re aiming for.
Through tailored mortgage broker services, the team at Indi Finance can help you explore suitable lenders, structure your loan effectively, and identify opportunities that align with your goals.
👉 Let’s find a smarter way forward, together.
Disclaimer:
The information in this article is general in nature and does not take into account your personal financial circumstances, objectives or needs. Lending policies, credit criteria and product availability can change, and not all borrowers will be eligible for low-deposit lending. Before making decisions about a home loan or any financial strategy, you should consider seeking personalised advice to understand what is appropriate for your situation.