The recent announcement by the Albanese Government about upcoming changes to the federal Home Guarantee Scheme has created lively rhetoric in real estate circles.
Let’s consider the impact of the following changes, some of which were previously planned for implementation on the 1st January 2026, but are now coming into effect on the 1st October 2025:
- First home buyers can purchase a property with just 5% deposit.
- Lender’s Mortgage Insurance (LMI) is NOT required for first home buyers purchasing a property with a 5% deposit.
- Places in the scheme were limited but there are now NO PLACE LIMITS – so all Australian first home buyers can apply.
- Income caps have been abolished, allowing ALL first home buyers – even those with high incomes – to access the scheme.
- Previous property price caps have increased significantly to reflect higher median prices. Melbourne’s first home buyers were only able to spend up to $800K, now they can spend up to $950K.
The Good News…
Not having to pay LMI can save first home buyers tens of thousands of dollars. And requiring only a 5% deposit helps them buy a home sooner, potentially saving rent costs and staying ahead of rising property values. Combine the higher price cap with interest rates coming down and first home buyers can now borrow more, giving them a better chance of finding a suitable property in their preferred location.
The Not So Good News…
Melbourne already has a supply issue – there are not enough homes to buy. If the market is flooded by cashed-up first home buyers competing for a depleted supply of available properties, prices will be driven up. Also, spending up to $950K means a bigger mortgage, and while the 5% deposit helps buyers get a foot in the door, it also means they are borrowing 95% of the property price and paying more interest on the loan.
As always, it pays to consider all options in the context of your own financial situation to decide what it the best course of action to take.
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