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‘National disgrace’: Banks profit while first home buyers struggle

By Gemma Crotty
03 October 2025 | 8 minute read
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Major banks have come under fire for cashing in on the government’s First Home Guarantee scheme by charging high interest rates on 95 per cent loans.

Industry professionals have been raising the alarm over major lenders benefitting from the First Home Guarantee scheme by charging high interest rates on 95 per cent loans, prompting a call for government intervention.

According to bRight Agent, figures from the banks’ websites show disparities between standard mortgage rates on products at 80 per cent LVR (loan-to-value ratio), and those applied to low-deposit first home buyers borrowing up to 95 per cent LVR.

 
 

“Increased interest rates usually indicate the level of risk to the bank, but under the government’s First Home Guarantee scheme it’s the government guaranteeing part of the risk; with the banks simply pocketing the windfall,” the company said.

As of 1 October, ANZ, NAB and CBA have published lending rates that reveal higher costs for higher LVR ratios.

For a standard 30-year owner-occupier principal and interest loan on a $1 million property, ANZ offered a 5.79 per cent rate for an 80 per cent LVR, but rises to 6.89 per cent for loans above 90 per cent LVR – adding an extra $1,562 to the monthly repayment.

For an 80 per cent LVR, CBA loans were at 5.39 per cent, but for a 95 per cent LVR, the loan rate jumps up to 6.99 per cent, an additional $ 1,826 per month.

Meanwhile, NAB has moved the LVR threshold downwards so that any loan above a 70 per cent LVR is charged the highest rate on its Tailored Home Loan plan of 6.24 per cent.

bRight Agent has called on the government to intervene by ensuring that any loan taken out under the First Home Guarantee scheme with an LVR above 80 per cent is charged the same interest rate as loans at 80 per cent.

Aaron Scott, bRight Agent co-founder, slammed the matter as interest-rate price gouging on a “national and generational scale”.

He said that, given the government is taking on the risk above 80 per cent of the LVR for first home buyers, there is no extra risk for the banks to be loaning up to 95 per cent.

“But instead of helping new first home buyers get into a home with a manageable rate, the banks are still slugging these Australians with sky-high rates,” he said.

“The banks are certainly not supporting the government’s efforts to make housing more affordable for first home buyers.”

He said the fact that young Australians will be punished with inflated rates on top of needing to scrape together a deposit to begin with is “nothing short of a national disgrace”.

Young people, especially first home buyers, need to do everything they possibly can not to exceed their means and savings.

You never really know what financial bumps and hardships will come your way, so its best not to be stretched to the limits,” he concluded.

You might also like: [Property frenzy and FOMO: Prices soar as buyers rush ahead of FHB scheme]

ABOUT THE AUTHOR


Gemma moved from Melbourne to Sydney in 2021 to pursue a journalism career. She spent four years at Sky News, first as a digital producer working with online video content. She then became a digital reporter, writing for the website and fulfilling her passion for telling stories. She has a keen interest in learning about how the property market evolves and strategies for buying a home. She is also excited to hear from top agents about how they perfect their craft.
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