The Albanese government has brought forward its eagerly anticipated 5% deposit guarantee scheme for first-time home buyers. What was originally set for 2026 will now launch on 1 October 2025, giving soon-to-be homeowners a real head start.
What’s New – and What’s Staying the Same?
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One simple deposit: First home buyers may now purchase their home with just a 5% deposit, bypassing Australia’s traditionally steep 20% barrier. Importantly, this means no Lenders’ Mortgage Insurance (LMI)—the government backs up to 15% of the loan in case of default.
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Removed barriers: Gone are the income caps and annual place limits—previously, eligibility was restricted to singles earning up to $125,000 or couples up to $200,000, as well as a cap of around 50,000 participants per year.
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Higher property limits: To better reflect today’s market, property price caps have risen significantly—for instance:
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Sydney: from $900,000 → $1.5 million
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Melbourne: from $800,000 → $950,000
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Brisbane: from $700,000 → $1 million
This opens more options across major cities and regions.
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Improved access: The Regional First Home Buyer Guarantee is now replaced by the streamlined First Home Guarantee, and over 30 lenders, including regional and customer-owned banks, are set to offer the scheme.
Why This Matters—And Who Gains Most
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Save time and money: The reduced deposit and elimination of LMI could shave years off saving time and tens of thousands of dollars in upfront costs—for example, a $1 million property now needs just $50,000 deposit vs. $200,000 previously, and saves about $42,000 in LMI.
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Broader access: Removing income limits and participant caps brings more Australians into the fold—especially those in high-cost markets and regional areas.
Potential Pitfalls to Consider
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House price pressure: Models from Lateral Economics suggest that increased demand could push up prices by 3.5% to 6.6% in the short term, with spikes up to 9.9% in segments targeting first home buyers—which could eat into the savings.
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Borrowing and taxpayer risk: Buyers entering with minimal equity may face financial stress during tougher economic cycles, while the government (and by extension taxpayers) absorbs risks if defaults outpace property values.
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Challenges entering the scheme: Some buyers face delays due to administrative requirements—like up-to-date tax returns—creating a “timing trap,” especially during early financial year periods.
Bottom Line
Launching three months early, the expanded 5% deposit guarantee scheme—available from 1 October 2025—is a bold move to make homeownership more accessible. With no income or place limits, higher price caps, and broad lender participation, the first-home-buying landscape is about to change. While the scheme’s benefits are significant—from affordability boosts to faster ownership—it will be wise for buyers to remain cautious about market dynamics and prepare thoroughly before stepping in.