The federal government will expand its first-home buyer guarantee scheme three months earlier than planned, with changes to income and property price caps now taking effect from 1 October. The move, announced by Prime Minister Anthony Albanese, is designed to make it easier for more Australians to enter the housing market with as little as a 5 per cent deposit.
Originally scheduled for January 2025, the expansion of the programme removes both annual caps and income limits for applicants. While welcomed by many aspiring homeowners, the policy shift has prompted warnings that it could intensify competition in an already overheated property market.
What the Scheme Offers Buyers
The first-home buyer guarantee allows eligible purchasers to buy a property with only a 5 per cent deposit. The government acts as guarantor for the remaining 15 per cent, ensuring buyers are not required to pay lender’s mortgage insurance (LMI) — a cost typically applied when deposits fall below 20 per cent.
According to the Treasury, this mechanism can save around £7,500 in LMI costs on a £250,000 home and more than £20,000 on a £500,000 purchase. It also significantly reduces the time needed to save for a deposit: estimates suggest that saving a 20 per cent deposit for a £500,000 home takes seven years on average, compared with just two years under the scheme’s terms.
From October, the scheme will undergo significant changes. The annual limit of 50,000 places for first-home buyers and single parents will be abolished. Income thresholds of £65,000 for individuals and £105,000 for couples will also be removed. In addition, property price caps are being lifted: in Sydney, the maximum eligible purchase will rise from £465,000 to £775,000, while Melbourne will see its cap increase from £410,000 to £490,000. In Brisbane, the ceiling will reach £515,000, up from £360,000.
Concerns Over Housing Affordability
While the government argues the accelerated rollout will support younger Australians struggling to buy their first property, experts warn that it could have unintended consequences. Emily Wallace, a Melbourne-based buyer’s agent, told that the earlier start date risks fuelling further competition. “When those caps get taken off, people who have more disposable income will be trying to get these properties and will outbid those who actually need the scheme,” she said.
The Treasury has projected that around 70,000 homes will be bought under the expanded scheme in the next 12 months. It also acknowledged a potential knock-on effect on house prices, estimating an increase of around 0.5 per cent over the next six years.
For policymakers, the challenge lies in balancing accessibility with affordability. Housing Minister Clare O’Neil said the initiative was intended to offer reassurance to Australians who feel locked out of ownership, while emphasising that the government is also seeking to ease pressures on the construction industry by freezing non-essential code changes until 2029.
