The Coalition government's $500 million plan to back first home buyers who don't have big enough housing deposits could see banks lift interest rates by 1 per cent to cover the costs of such higher risk loans and possibly deter lenders from participating in the scheme.

With just four days out from the federal election the Coalition's First Home Loan Deposit Scheme, which has been backed by Labor, could see loans of 95 per cent of a property's value taken up by first home buyers. However analysts said such loans would force banks to allocate more capital to cover risk, reducing their  profitability.