A big change, arriving fast
From 1 October 2025, the Government’s expanded First Home Guarantee kicks in, letting all first-home buyers purchase with a 5% deposit while avoiding Lenders Mortgage Insurance (LMI) thanks to a government guarantee. The rollout has been brought forward and will run with no caps on places and no income limits, alongside higher property-price caps to reflect current market values.
How it works
Under the expanded scheme, you bring 5%; the Government guarantees part of the shortfall so lenders can write the loan without LMI. That insurance saving can be significant: the Government estimates buyers will collectively avoid around $1.5 billion in LMI in the first year alone.
New property-price caps (from 1 Oct 2025)
Sydney: $1,500,000
Melbourne: $950,000
Brisbane: $1,000,000
Adelaide: $900,000
Perth: $850,000
Hobart: $700,000
ACT: $1,000,000
Regional/other areas: caps lifted proportionately by state
Example from the Government’s release: A Brisbane first-home buyer could purchase a $1,000,000 home with a $50,000 deposit, potentially saving about $42,000 in LMI and shaving years off deposit-saving time.
Who this helps most
Buyers who are already close to a deposit and want to enter sooner.
Households with solid income stability but limited savings time (e.g., rising rents).
Those in markets where new caps actually match typical entry-level prices.
Source: ABC News
The catches (read before you leap)
Bigger mortgage = bigger repayments. A 5% deposit increases your leverage, so you’ll need strong buffers for rate moves and living-cost shocks.
Price-pressure risk. Expanding eligibility (no income caps, unlimited places) can lift demand faster than supply, which multiple analyses warn could push prices higher in targeted segments.
Source: The Australian & News.com
Rate-cut backdrop
The RBA lowered the cash rate to 3.60% on 12 August 2025, its third cut of the year, taking cumulative easing to 75 bps in 2025. That improves borrowing capacity for many buyers — but it also supports demand at the same time supply remains tight. Plan with both effects in mind.
Source: RBA
What to do next
Price-test your options at both today’s rate and +1.0% stress to avoid thin margins.
Model rent vs buy properly (total cost of ownership, not just repayments).
Check your cap for your city/region and confirm a lender actually offers suitable products under the scheme.
Set buffers: 3–6 months of living and loan costs is a good starting point.
Keep emotions in check: if the numbers don’t work, don’t stretch.
Source: Housing Australia
The bottom line
For the right buyer, this is a genuine shortcut: years shaved off deposit saving and LMI costs avoided. For others, it risks becoming a price-pump that swaps deposit pain for long-term repayment strain. The win is in the maths, not the headline.
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