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With income caps and the limit on places gone, more first home buyers can enter at once, and selling agents will price and market to that demand. Know what you can genuinely borrow, and what you are willing to pay, before the first offer.
For years the federal First Home Guarantee came with a long list of gates. You had to fit under an income cap, beat thousands of other applicants to a limited number of places each year, and find a home below a modest price ceiling. From late 2025 most of those gates are gone.
The scheme was expanded and renamed the Australian Government 5% Deposit Scheme, and it is now open to every first home buyer who meets the basic eligibility rules. That is a meaningful shift, and it changes the calculation for anyone who has been saving towards a deposit. It also comes with a price-side warning worth understanding before you sign anything.
What actually changed
Three of the old limits have been lifted at once. There are no longer any income caps, so a buyer's salary no longer rules them in or out. The annual cap on places has been removed, meaning there are now unlimited spots rather than a fixed allocation that ran out partway through the year. And the property price caps have been raised, so more homes in more suburbs now fall within reach of the scheme. In NSW capital cities and regional centres, the price cap rose to $1.5 million.
The core mechanic is unchanged. An eligible first home buyer can purchase with a deposit of just 5%, and the government guarantees the rest of the deposit shortfall. Because of that guarantee, the buyer avoids paying Lenders Mortgage Insurance, which lenders normally charge when a deposit is below 20%. For a full breakdown of how the guarantee works and who qualifies, our First Home Guarantee guide walks through the eligibility detail.
Why skipping LMI matters
LMI is a cost that catches a lot of first home buyers by surprise. It protects the lender, not you, and it can run into many thousands of dollars depending on the loan size and deposit. Avoiding it is one of the biggest financial advantages the scheme offers. If you are unsure what LMI is or how it is calculated, our guide to Lenders Mortgage Insurance explains the mechanics and when it normally applies.
Getting into a home with a 5% deposit rather than 20% also changes the timeline. A smaller deposit means less time saving and an earlier entry into the market. To see what a 5% deposit looks like against the price you are targeting, our guide on how much deposit you need to buy a house sets out the numbers and the other upfront costs to budget for.
The price effect to weigh
There is a genuine trade-off here. When you make it easier for more buyers to enter the market at the same time, you add demand, and added demand tends to push prices up.
The Insurance Council of Australia has estimated the expansion could push prices up to 10% higher in the first year in the markets that first home buyers favour, and between 3.5% and 6.6% higher nationally. Economists who study housing have made a broader point: demand-side measures like deposit schemes generally lift prices, and the structural fix for affordability is increasing housing supply rather than subsidising demand. Helping more people buy without building more homes can feed back into the very prices buyers are trying to get ahead of.
None of that means the scheme is a bad deal for an individual buyer. It means you should enter with your eyes open. If a chunk of the benefit you gain from a smaller deposit is offset by paying a higher price, that is a real consideration when you decide how much to offer and where.
Stacking it with other support
The 5% Deposit Scheme does not replace the other help available to first home buyers. In most cases you can still combine it with state First Home Owner Grants and stamp duty concessions, which can together make a sizeable difference to your upfront costs. The rules and amounts vary by state and by whether you are buying new or established, so check what applies where you are buying.
Our First Home Owner Grant guide covers the state-by-state grants, and the broader first home buyer guide pulls the whole process together, from saving and pre-approval through to settlement.
What it means for you
The expanded scheme removes the income cap, the limit on places, and a good deal of the price-cap restriction that kept buyers out before. For a lot of first home buyers, that turns the 5% deposit pathway from something they might qualify for into something they almost certainly can use.
The smart move is to pair the opportunity with a clear-eyed view of the price effect. Work out what you can genuinely borrow first, then decide what you are willing to pay in a market where demand has just been given a nudge. Run the numbers with our borrowing power calculator so you know your real ceiling before you start making offers.
One year on: how many buyers have used it?
On 1 October 2026, Housing Australia data cited by the federal government showed the expanded scheme had supported 102,594 first home buyers in the first year after the October 2025 changes (the period with no income test, no cap on places and higher price limits). That is on top of more than 280,000 buyers supported since 2022 across the life of the Home Guarantee Scheme. The government estimates those buyers avoided more than $1.4 billion in lenders mortgage insurance in that first expanded year alone.
Take-up is uneven by state: Victoria, New South Wales and Queensland accounted for the bulk of the first-year figure, which reflects where most first home buyer activity already sits rather than any restriction on the scheme itself.
100,000 homes reserved for first home buyers
Deposit support is only one lever. The Albanese Government's election commitment to help deliver up to 100,000 homes reserved for first home buyers is being rolled out through state and territory deals. South Australia struck the first agreement in January 2026, unlocking about 17,000 homes including nearly 6,877 for first home buyers. The ACT followed in April 2026 (1,700+ homes reserved for first home buyers within about 4,900 new homes), and Tasmania in April 2026 (up to 2,101 homes for first home buyers). Construction on the first reserved homes is expected from 2027–28 in the announced projects.
Those homes are supply-side: they do not replace the 5% Deposit Scheme, but they are meant to give first home buyers a fairer shot at new stock in growth corridors rather than only competing on established listings. Our 5% Deposit Scheme guide and national first home buyer guide cover how federal and state help fits together.
Keep reading
- How to Sell a House in Australia (2026)A step-by-step guide to selling residential property in Australia: deciding when to sell, choosing the right agent, setting price, the auction vs private treaty decision, the campaign, contracts and settlement.
- How to buy property in Australia: the complete step-by-step guide (2026)Everything you need to know about buying property in Australia. From assessing your finances and researching suburbs through to inspections, exchange, and settlement.
- How Much Is My House Worth? Free Property Appraisal (Australia)Pick your suburb, see what houses there are selling for, and get a free appraisal from a local agent. Plus the three ways a house is valued in Australia, why they disagree, and what actually drives your number.
- Are House Prices Crashing in Australia?Headlines ask whether Australian house prices are crashing. Cotality's September data shows a sustained correction (values fell 1.1% in the month, the sixth straight decline, and sit 5.2% below the March 2026 peak with flat growth over the year), not a sudden collapse. Here is what the numbers mean for buyers and sellers.
- Home values post their biggest monthly fall since 2022 — and the market has split in twoNational home values fell 0.4% in June, the largest monthly drop since December 2022, with Sydney down 3.2% for the quarter while Perth, Brisbane and Darwin kept climbing. Here is what the mid-year data says about where the market is heading, city by city.
- Negative gearing and CGT reform is now law: what changes on 1 July 2027, and what to do before thenParliament passed the federal budget's investor tax package on 25 June, and the ATO has confirmed the measures are law. Negative gearing narrows to new builds, the 50% CGT discount is replaced with indexation, and a late amendment bans new SMSF property borrowing. Here is the full picture and the 11-month runway.