Less than 2% deposit reduced for home loans

More South Australians may be able to own a home with the help of a state-government backed lender who lowered their minimum deposit requirements.

With as little as 2 per cent deposit, eligible graduates will be able to apply for a home loan with HomeStart Finance.

Successful applicants won't need to pay lender's mortgage insurance, required by most lenders if home buyers don't have a 20 per cent deposit, potentially shave off thousands of dollars in upfront costs.

Adelaide, Perth and Darwin have risen in July while interest rates have gone up for other Australian major cities.

Treasurer Stephen Mullighan said the loan could wipe out savings plans of people trying to buy their first home.

Instead of South Australians having to spend years and years trying to save 20 percent deposit to get a loan with one of the big four banks, that time has been reduced to only months, he said.

Mullighan said that the Deposit reduction for the HomeStart scheme would allow low-to-mid income earners the chance to compete at auctions.

He said the government was expecting the Adelaide housing market to stabilise as interest rates went up.

He estimates that more than 250,000 South Australians with a Certificate III or higher qualification will be eligible for the scheme.

The minimum deposit required for a loan is 3 per cent.

The loan applicants will only need to fork out $8000 in deposit and pay $17,000 instead of $25,500 in deposit for a $400,000 home.

Electrician Robert Thiel and hospitality worker Beth Mayfield, who are currently renting in Lockleys, say the change will help the couple get into the housing market sooner.

Ms Mayfield said that any amount you can save as a potential home owner is life-changing.

I never thought it would be possible for me, so it's really exciting that it might be something really attainable for me. Ms Mayfield said her rent has increased in recent months, encouraging her to consider becoming a home owner.

A graduate loan from HomeStart will be offered on Tuesday.