Big Changes for First Home Buyers: 5% Deposit and Higher Property Price Caps

The Australian Government is making major changes to help first home buyers get into the property market sooner. From 1 October 2025, the Home Guarantee Scheme will expand, and a new rule will allow all first home buyers to purchase with only a 5% deposit and no lenders mortgage insurance.

These reforms are designed to make home ownership easier and more affordable across Australia.

Expansion of the Home Guarantee Scheme

The Home Guarantee Scheme currently limits who can apply. Income caps and property price caps excluded many buyers. From October:

• Income restrictions removed – buyers earning above current thresholds will now be eligible.
• Property price caps increased – in some cities the limit will rise to $1 million or more.
• More suburbs included – new analysis shows the number of eligible suburbs will almost double.

According to Cotality data, only one third of suburbs across the country were affordable under the old caps. With the new limits, more than 63% of suburbs will now qualify. This includes many city and regional areas that were previously out of reach.

5% Deposit for All First Home Buyers

The Albanese Government has also brought forward the 5% deposit scheme. Starting 1 October, every first home buyer can purchase with just a 5% deposit and no lenders mortgage insurance (LMI).

Key features include:

• No income caps
• No property location restrictions
• No LMI costs – saving buyers tens of thousands of dollars
• Aligned property price caps – matching today’s housing market values

For example, in Brisbane a buyer could purchase a $1 million property with only a $50,000 deposit. The government guarantee removes the need for expensive mortgage insurance, cutting upfront costs dramatically.

Benefits for First Home Buyers

These changes will help first home buyers by:

• Reducing the time needed to save a deposit
• Opening up more suburbs and housing markets
• Saving thousands on lenders mortgage insurance
• Giving access to higher value properties

It will also reduce reliance on parental support. Buyers without help from family will have a clearer path into the market.

Risks and Considerations

While the reforms expand access, first home buyers should also be cautious.

• Loan affordability matters – a lower deposit makes entry easier but repayments must still be manageable.
• Housing supply is limited – more buyers in the market could increase competition and push up prices.
• Interest rates and costs – long-term affordability depends on stable income and careful budgeting.

From October 2025, first home buyers will have more choice, faster entry, and lower costs thanks to expanded property price caps and the 5% deposit guarantee.

These reforms could reshape the path to home ownership for thousands of Australians. Buyers should take advantage of the new opportunities, while also planning carefully to ensure their first step into the property market is a sustainable one.

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From October 2025, first home buyers can enter the market sooner with a 5% deposit and no lenders mortgage insurance. Expanded property price caps and removal of income limits under the Home Guarantee Scheme will open up more suburbs and reduce upfront costs.