Banks would have no justification in hiking interest rates for first homebuyers taking advantage of the government's first home loan deposit scheme, Finance Minister Mathias Cormann says.
Under the scheme, the government would offer loan guarantees for first homebuyers, allowing them to buy properties with deposits of just five per cent instead of the typical 20 per cent.
Analysts have expressed concerns banks might be forced to allocate more capital to cover the loans with only five per cent deposits, forcing some to raise the interest rate applied to them.
However, Senator Cormann said such banks would not be allowed to take part in the scheme.
"The reason why there is no justification at all for any bank to impose a higher interest rate on these first homebuyers is because their level of exposure does not change," he told AAP.
"The Australian government provides a guarantee over the additional borrowing.
"The bank, as it does now, would have a mortgage over the property, with the bank's exposure limited to a maximum LVR (loan-to-value ratio) of 80 per cent."
Banks would still be legally required to meet their responsible lending obligations and borrowers would receive the additional benefit of not needing mortgage insurance.
"Based on our conversations with industry, we are very confident that banks will want to participate in this scheme and do so without imposing a higher interest rate," Senator Cormann said.
Meanwhile, Prime Minister Scott Morrison defended the fact that some of his colleagues had not seen the housing plan - and it was not run past cabinet - before it was announced on Sunday.
He and his senior economic ministers have for months been considering ways to support first homebuyers, and intentionally announced the option chosen during the campaign's dying days.
"It was our decision to ensure that as we go into the final weeks of the campaign, that there would be a very clear focus on what the choice would be," Mr Morrison told reporters in Adelaide on Tuesday.
Labor has backed the plan, describing it as modest and based on existing schemes in New Zealand and Western Australia.
About 10,000 people earning up to $125,000, or couples earning $200,000, are expected to benefit each year under the new scheme.
That would have been about one-in-11 new homebuyers in 2018.
"It is a modest proposal. It is a restricted proposal," Mr Shorten told reporters in Tasmania.
The policy is expected to firm house prices, which the prime minister described as a good thing.
"People should have confidence in the value of their own homes, and I'm giving them that confidence through the policies that we're putting in place."
The proportion of first homebuyers slightly rose from 27.1 per cent in February to 27.8 per cent in March, according to figures published by the Australian Bureau of Statistics on Monday.
That marked a six-year high in the share of people buying their first home in the market.
