First Home Buyer 5% Deposit Scheme: Will it really help first home buyers?

The Home Guarantee Scheme (First Home Guarantee) is a nationwide government program to help first home buyers get into the market with a smaller down payment, specifically allowing a 5% deposit without having to pay Lenders’ Mortgage Insurance (LMI), because the government “guarantees” part of the loan.

What’s changing from 1 October 2025

These reforms substantially expand access. Key changes include:

Change	Before 1 October	After 1 October
Places available	Limited number of guarantees per year (a cap on how many first home buyers could use it).	Unlimited places, any eligible first home buyer who meets the deposit requirement can apply.
Income caps	There were limits on income (e.g. individuals and couples) to qualify.	Income caps removed, now first home buyers regardless of income can access the scheme.
Property price caps	Price caps varied by region and were lower, meaning many homes were excluded.	Higher property price caps across all states/territories to reflect market conditions. Examples: Sydney capital/regional centres cap moves from $900,000 → $1,500,000; Melbourne $800,000 → $950,000; Brisbane from $700,000 → $1,000,000.
Regional simplification	There was a separate “Regional First Home Buyer Guarantee” with slightly different conditions for regional areas.	The regional scheme is replaced by the First Home Guarantee in all areas, simplifying access.

Why it matters

These changes are significant and will help many people. Here are some of the main benefits:

Lower barrier to entry: The 5% deposit threshold becomes more realistic for more people. The removal of LMI in many cases saves tens of thousands in upfront costs.
Faster path to buy: With raised property caps and no income/places caps, people can move faster, rather than waiting years to save a bigger deposit under stricter conditions.
More options: Since more homes are now within the allowable price caps, buyers have more geographic and property type choices. Regional simplification also opens up more areas.

Potential challenges or things to watch out for

While largely positive, there are trade-offs and risks:

Impact on house prices: Increasing buyer eligibility can increase demand, which could put upward pressure on property prices. The Government is predicating only modest growth in prices, however we believe these are understated and wouldn’t be surprised to see increases in value of 10% + over the next 6-12 months.
Affordability still tough in many areas: Even with higher caps, prices in many capital cities (inner suburbs etc.) may still exceed the new caps. So not all first home buyers will find something acceptable.
Financing & lender criteria: Just because you meet the scheme requirements doesn’t mean you’ll automatically get a loan. Lenders will still check credit, income, borrowing capacity, etc. Also, participating lenders vary and there can be waiting periods.
Be aware of other costs: Stamp duty, legal fees, maintenance, rates, etc., still apply. A cheaper deposit doesn’t eliminate all purchase costs.

Who benefits most?

Here are groups likely to gain most:

First home buyers who have strong incomes but haven’t had enough time to save a 20% deposit.
Those priced out by strict income or number caps. Removing those opens access to more people.
Buyers in high price markets (Sydney, Melbourne, etc.), since the new caps are much more aligned to current market values.
Regional buyers, thanks to simplified scheme structures.

What to do if you’re considering using the scheme

If you’re planning to buy your first home under the scheme, here are some steps:

Check eligibility: Use the official tools (Housing Australia’s eligibility tool) to confirm you qualify under the rules post-October.
Find a participating lender: Not all lenders may be set up immediately for the new scheme terms. Ask whether they support the updated criterion.
Understand the property price caps in your area: Even though they are higher, there are specific caps per region. Know what applies to your location.
Get your finances in order: Even with a 5% deposit, you’ll need to show the rest (income, repayments, etc.) can be serviced. Budget for all other costs.
Act at the right time: Because the scheme changes on 1 October, for some people it might be beneficial to delay or time contracts, financing etc., around that date.

Overall take & implications

These reforms are among the more significant moves in Australia’s housing policy in recent years, aimed squarely at improving accessibility rather than, say, supply-side measures (though those are also part of the broader housing strategy). They reflect recognition that many households are locked out not because they don’t want to buy, but because achieving a large deposit is difficult and takes a long time.

It’s also important to remember that this policy is a nationwide initiative, but each state and territory has its own set of first-home buyer programs. These vary significantly and can often be used in conjunction with the federal scheme.

New South Wales (NSW): The First Home Buyers Assistance Scheme offers full or partial stamp duty exemptions on homes up to $1 million, and a $10,000 First Home Owner Grant (FHOG) is available for new homes under $600,000.

Queensland (QLD): A $30,000 FHOG applies to new homes valued up to $750,000. As part of the 2025–26 Queensland Budget, the Boost to Buy scheme was introduced to help eligible first-home buyers by providing an equity contribution towards their purchase. Applications are expected to open later in 2025.

Victoria (VIC): First home buyers can receive a full stamp duty exemption on homes up to $600,000, with a sliding concession up to $750,000. A $10,000 FHOG applies to new homes valued up to $750,000.

South Australia (SA): A $15,000 FHOG is available, intended for those buying or building a new residential property as a principal place of residence.

Northern Territory (NT): The HomeGrown Territory Grant provides first-home buyers with $50,000 to help build or purchase their first home.

Western Australia (WA): Offers a $10,000 FHOG for buying or building a new home. There is a First Home Owner Rate of Duty (FHOR) so that eligible first-home buyers may receive a full stamp duty exemption for homes up to a certain threshold, with concession rates for higher values.

Tasmania (TAS): Provides a $10,000 FHOG for new or substantially renovated homes. First home buyers may qualify for an exemption from stamp duty on established homes up to ~$750,000 until mid-2026; there are also concessions for other values and specific eligibility criteria (e.g. residence requirement).

Other states and territories have their own variations, with differences in property value limits, grant amounts, and eligibility rules. Common requirements include being a genuine first home buyer, using the property as your principal place of residence, and meeting specific price caps.

For the most accurate and up-to-date information, always check the official government websites for your state or territory.

Looking to buy your first property?

With the new First Home Guarantee changes, our team can help you navigate the market and secure the right place.