First home buyers will only need a five per cent deposit from January next year after the Senate passed legislation to facilitate the First Home Loan Deposit Scheme.

Housing Industry Association Managing Director Graham Wolfe has welcomed the move to reduce the required amount from 20 per cent.

He said the National Housing Finance and Investment Corporation (NHFIC) would now be able to offer the deposit guarantees that underpin the initiative.

“The legislation also establishes a new housing research function within NHFIC, which is supported by $25 million in funding, to examine housing demand, supply and affordability,” he said.

“HIA has long argued that there needs to be a national approach to helping first home buyers enter the market and to address the time that saving a deposit now takes.

“Along with stamp duty and securing finance, the time it takes to save a home deposit remains one of the main barriers to people’s home ownership aspiration.

“Helping 10,000 first home buyers a year achieve their home ownership dream sooner, by providing a guarantee to support eligible buyers approach a lender with a deposit of 5 per cent or more, will take some of this pressure off.

“Independent research shows that half of all renters believe they will never afford to buy a home even though over 90 per cent of renters would like to. Renters will also benefit from the Scheme as more new houses and more home owners mean more supply and less pressure on rental prices.”