Australia’s Home Guarantee Scheme has expanded, allowing first-home buyers to access the property market with a deposit as low as 5%. The changes, effective today, offer substantial financial relief, making home ownership more attainable for many.
This expansion eliminates previous restrictions, such as income caps and applicant limits, and raises the maximum property price thresholds for eligible buyers. This move comes as part of the government’s ongoing effort to address housing affordability challenges, offering first-home buyers a significant financial boost.
A Game-Changer for First-Home Buyers
The Home Guarantee Scheme is an integral part of Australia’s housing affordability strategy. Traditionally, homebuyers needed a 20% deposit to avoid paying lenders’ mortgage insurance (LMI), which can amount to thousands of dollars in extra costs. However, with the new scheme, Australians can now purchase a property with just a 5% deposit and without the additional burden of LMI.
This reduction in upfront costs significantly lowers the financial barrier for potential homeowners. According to Canstar, for a home worth $920,000, the LMI would typically cost around $36,730 for a buyer with a 5% deposit. With the Home Guarantee Scheme, this cost is waived, effectively saving thousands of dollars.
The changes also extend the scheme’s reach by removing limits on applicants’ incomes. Previously, single buyers earning over $125,000 annually, or joint buyers earning more than $200,000, were ineligible. These caps have now been lifted, providing a wider pool of people access to this financial assistance.
A More Accessible Housing Market
As part of the scheme’s expansion, the government has raised the property price caps across multiple Australian cities. For example, in Sydney, the cap has increased to $1.5 million, while Melbourne now has a $950,000 cap. These changes aim to make home ownership more feasible in increasingly expensive markets.
The scheme’s broader eligibility and higher price limits are expected to help ease the pressure for those looking to enter the property market. For first-time buyers in cities like Sydney, it can reduce the time needed to save for a deposit by over seven years. As reported by Domain, a Sydney household would have previously faced over ten years to save for a 20% deposit on a $1.5 million home. Now, with the scheme, this timeframe is reduced to just under three years.
Although the scheme’s benefits are clear, some experts have raised concerns about its potential impact on housing prices. According to Dr Nicola Powell, Chief of Research and Economics at Domain, the expansion could “supercharge” demand at the lower end of the housing market, possibly pushing prices upwards. While the Treasury has forecast a modest 0.5% price increase over six years, some analysts predict a more immediate surge in property values, particularly in more competitive markets.
