The Australian government has launched the most significant expansion to the First Home Guarantee scheme. The changes took effect on 1 October 2025. All eligible first home buyers can now purchase a property with just 5% deposit. The previous year’s plan has been fast-tracked by twelve months.
Key Changes Transform Access
The expansion removes three major barriers that previously limited scheme access. Income caps have been completely eliminated, allowing buyers regardless of their earnings to participate. Previously, individuals earning more than $125,000 or couples with combined income above $200,000 were excluded.
Place limits no longer exist under the new framework. The scheme previously offered 35,000 places annually for first home buyers. All eligible applicants can now apply without competing for limited spots.
Property price caps have increased substantially across all states and territories. Sydney’s cap jumped from $900,000 to $1,500,000. Brisbane buyers can now purchase homes up to $1,000,000, up from $700,000. Melbourne’s limit rose from $800,000 to $950,000.
First Home Guarantee scheme changes comparison
Expanded Eligibility Criteria
Australian citizens or permanent residents aged 18 and above remain eligible for the scheme. Applicants must be first home buyers or not have owned property in Australia for the past ten years. Joint applications between partners, friends, or family members are permitted.
The property must serve as the buyer’s principal residence. Investment properties remain excluded from the scheme. Participating lenders provide owner-occupier home loans with principal and interest repayments. Loan terms extend up to 30 years, with an additional three years allowed for new home construction.
First Home Guarantee eligibility criteria
Financial Benefits and Savings
The scheme eliminates Lenders Mortgage Insurance costs for eligible buyers. LMI typically ranges from $27,765 for an average unit to $36,730 for an average house. First home buyers using the scheme are expected to avoid around $1.5 billion in potential mortgage insurance costs in the first year alone.
Housing Australia provides a guarantee of up to 15% of the property’s value to participating lenders. This allows purchasers to borrow up to 95% of the property’s value without paying LMI.
The median home price in Australia stands at $844,000. A 5% deposit equals $42,200. The last time $42,200 covered a 20% deposit for a median home was 2002.
State-by-state property price caps and financial benefits breakdown for First Home Guarantee scheme participants
Market Impact Analysis
The scheme expansion dramatically increases the number of qualifying markets. Under previous caps, around one-third of markets nationally had median values below the limits. The new rules mean 63.1% of markets now qualify.
House markets qualifying under the scheme increased to 51.6% nationally. Unit markets saw 93.7% qualify under the new caps. Adelaide recorded the largest increase for houses, with 46.6% of suburbs now qualifying, up from just 2.9% previously.
Brisbane experienced the biggest proportional increase for units. Some 97.5% of suburbs now qualify, compared to 36.9% under the old system.
Regional Access Simplified
The Regional First Home Buyer Guarantee has been merged into the main First Home Guarantee scheme. This simplifies access for buyers in regional areas. The same eligibility criteria and benefits now apply across all locations.
Regional centres including Illawarra, Newcastle, Lake Macquarie, Geelong, Gold Coast, and Sunshine Coast receive the higher capital city price caps.
Expert Analysis and Warnings
Housing experts predict potential price increases following the scheme expansion. Industry analysts forecast house prices could rise by 10% in the first year. The Insurance Council supports this prediction.
Treasury modelling suggests a more modest impact. Government forecasts indicate prices will increase by only 0.5% over six years. Housing Minister Clare O’Neil expects tens of thousands of young people to achieve home ownership in coming years.
Some economists express concerns about encouraging risky borrowing practices. The Centre for Independent Studies warns the policy could inflate house prices through increased bidding competition.
Application Process
Housing Australia administers the scheme through over 30 participating lenders. Major banks, regional institutions, and customer-owned banks participate in the programme. The government directs Housing Australia to promote lender diversity, giving buyers greater choice.
Applicants cannot apply directly to Housing Australia. All applications must be submitted through participating lenders or authorised mortgage brokers. Lenders confirm eligibility and conduct standard loan assessments.
Comparison with State Schemes
The First Home Guarantee operates separately from state-based First Home Owner Grants. Queensland offers $30,000 grants for new homes under $750,000. Western Australia provides $10,000 grants for new properties.
State grants complement the federal guarantee scheme. Buyers may be eligible for both programmes simultaneously. Income tests do not apply to most state grant schemes.
Future Outlook
Since 2022, Labour has helped over 180,000 first home buyers secure properties with lower deposits. The government reports 6,000 more first home buyer loans annually compared to the previous Coalition period.
The expanded scheme forms part of the government’s $43 billion housing agenda. This includes building more homes, backing first home buyers, and supporting renters. The changes address what Prime Minister Anthony Albanese calls “the generational scale” of housing affordability challenges.
Property analysts expect the scheme to accelerate market entry for many buyers. A Brisbane buyer can now purchase a $1,000,000 home with a $50,000 deposit. They could save up to 10 years off deposit saving time and approximately $42,000 in mortgage insurance.
The expansion represents the government’s commitment to helping Australians achieve home ownership sooner while reducing upfront costs. The scheme enables buyers to pay towards their own loans instead of continuing rental payments.
