Term deposits deliver safe, fixed returns, but property has historically outpaced them.
A $50k deposit today could buy a $500k home under the First Home Guarantee (eligibility applies).
Waiting three years could see your savings grow, but the home you want may grow even faster.
New Home Guarantee Scheme changes mean no income caps, no place limits, and higher property price caps.**
How term deposits stack up
A term deposit locks your money away for a set period, typically one to five years, at a fixed rate of return. As of early 2025, the average interest rate on bank term deposits in Australia was around 3.20% to 3.35% p.a., with actual rates varying depending on the term and the institution. Term-deposit rates differ depending on the bank or credit union (the ADI) and how long you lock your money away.
On $50,000, that means around $2,250 in interest after a year, $7,000 after three years, and $12,500 after five. It’s steady, predictable, and government-guaranteed up to $250,000.
The downside? Your growth is capped. No matter what happens to inflation, wages, or property prices, your return is fixed. If the housing market grows faster than your term deposit, you may fall behind.
How property has performed
By contrast, Australian housing has delivered stronger long-term growth. According to KPMG’s Residential Property Market Outlook (Jan 2025), national house prices grew by 5.1% in 2024 and are forecast to keep rising, though at a slower pace in 2025.
That level of growth means that, on average, homeowners gained the equivalent of tens of thousands of dollars in value in just one year.
While growth rates vary widely between suburbs and states, the broader trend has been clear: property has generally outpaced the slow, safe returns of term deposits.
Case study: $50,000 saved vs $50,000 used
Let’s compare two first-home buyers starting with the same amount of savings.
The first buyer decides to wait.
They put their $50,000 into a three-year term deposit at 4.5%. By the time it matures, they have just under $57,000 before tax.
But the $600,000 property they were eyeing is now closer to $695,000 after three years of average growth. Actual outcomes vary by suburb, so even with more savings, some buyers may find themselves further from their goal.
The second buyer uses their savings to purchase sooner.
With around $25,000 plus costs, they buy a $500,000 property under the First Home Guarantee, which allows eligible buyers to purchase with just a 5% deposit and avoid Lenders Mortgage Insurance.
After three years of growth at 5.1% a year, the property is worth about $580,000. Their equity has grown by roughly $80,000, not accounting for transaction costs, loan interest or other holding costs, compared with about $7,000 from the term deposit.
The difference highlights the opportunity cost of waiting. While one buyer’s savings grew safely, the other buyer’s money worked harder in the market.
Suburb-level examples
Here are examples of suburbs that fit within the 2025 First Home Guarantee caps and how much a 5% deposit would be.
State / territory | Example suburb (unit) | Median price | 5% deposit |
|---|---|---|---|
NSW (Metro) | Austral | $849,875 | ~$42,500 |
VIC (Metro) | Tarneit | ~$476,000 | ~$24,000 |
QLD (Metro) | Russell Island | $530,252 | ~$26,500 |
Source: Cotality. Median prices are indicative only. Eligibility, lender approval and maximum home price limits apply.
These aren’t just numbers on a page. They’re suburbs where buyers can enter the market now, with deposits that many Australians already have saved.
For up-to-date First Home Guarantee property price caps, use the official Housing Australia property price cap tool.
You might also be interested in: State-by-state guide to buying with the Home Guarantee Scheme
The 5% deposit pathway
The First Home Guarantee is designed to make that leap more achievable. From 1 October 2025, the scheme has been expanded in important ways:
No more income caps. Eligibility is no longer restricted by how much you earn.
No more annual place limits. If you’re eligible, you won’t miss out simply because the quota has filled.
Higher property price caps. Buyers can purchase homes up to $1.5 million in New South Wales, $950,000 in Victoria, and $1 million in Queensland, with adjusted caps across other states and regions.
This opens the door for more buyers to act sooner, even in higher-value markets.
You might also be interested in: First Home Guarantee: Buying your first home with a 5% deposit
The risks of buying early
It’s important to balance the potential rewards with the realities of homeownership. Taking on a mortgage comes with obligations that a term deposit doesn’t.
Interest rates may rise, pushing repayments higher. Property markets can flatten or dip, especially in the short term, meaning your equity doesn’t always move in a straight line. And homeownership brings added costs like insurance, rates, and maintenance.
That doesn’t mean buying sooner is the wrong choice. But it’s worth entering with a clear picture of your budget, your buffer, and your long-term goals.
Who should consider breaking a term deposit?
Breaking a term deposit to buy might make sense if you’re financially stable, meet the scheme criteria, and are looking in markets where prices are rising faster than your savings.
It may also suit couples or singles who want to secure a foothold in accessible suburbs like Tarneit or Russell Island, where deposits are relatively modest.
On the other hand, if your income is variable, or if you need more time to save for upfront costs, staying in a term deposit for now could be the safer option. It provides stability while you get ready for ownership.
You might also be interested in: Your step-by-step checklist to buying your first home
Don’t forget grants and concessions
Buying sooner may also unlock additional help. Many states and territories offer first-home buyer grants and stamp duty concessions that can save you tens of thousands of dollars.
These vary by location and property type, so it’s worth checking what you may be entitled to.
You might also be interested in: First-home buyer guide: Government grants and concessions
The real cost of waiting
Leaving your deposit in the bank feels like progress. Your balance grows, and it’s guaranteed.
But the hidden cost is that the home you’re saving for may be growing faster. Over a three-to-five-year period, that gap can become significant.
That’s why the First Home Guarantee exists, to bridge the gap between saving slowly and owning sooner.
It won’t be the right choice for everyone, but for those who are eligible and ready, it can make the path to ownership far shorter.