Big Changes to the 5% Deposit Scheme for First Home Buyers

The Australian Government’s First Home Guarantee, commonly known as the 5% deposit scheme, is set to expand significantly — and now even earlier than expected. From 1 October 2025, first home buyers will have broader access to purchase property with a deposit as low as 5%, while avoiding the cost of Lenders Mortgage Insurance (LMI).

How the Scheme Works

Ordinarily, buyers need a 20% deposit to avoid paying LMI. Under this scheme, eligible first home buyers can purchase with just a 5% deposit, with the government guaranteeing the remaining 15%. The guarantee acts as a substitute for a larger deposit, giving banks the confidence to lend while saving buyers from the extra cost of LMI.

What’s Changing from October 2025

1. Removal of Income and Place Caps

• Until now, eligibility depended on income thresholds (e.g. $125,000 for singles, $200,000 for couples) and a limited number of annual scheme places.

• From October, these restrictions will no longer apply. The scheme becomes uncapped in both income and availability.

2. Higher Property Price Caps

To reflect current housing market conditions, the maximum property values under the scheme will rise. Examples include:

• Sydney/NSW metro: from $900,000 → $1.5 million

• Melbourne metro: from $800,000 → $950,000

• Brisbane metro: from $700,000 → $1 million

• Increases also apply across other capitals and regional centres.

3. Wider Access Across the Market

With higher property caps and no limits on places, a larger number of first home buyers will be able to consider properties that were previously out of reach.

Why It Matters

The expansion of the 5% deposit scheme is one of the most significant housing policy changes in recent years. It allows first home buyers to:

• Enter the market earlier, rather than waiting to save a full 20% deposit.

• Avoid LMI, which can add tens of thousands of dollars to the upfront cost of buying.

• Consider a broader range of properties due to higher price thresholds.

However, the scheme does not provide a cash grant. Buyers must still qualify for the loan and remain responsible for repayments. Some analysts have also cautioned that easier access to finance may add pressure to property prices, depending on supply levels.

In Summary

From October 2025, the First Home Guarantee will:

• Allow first home buyers nationwide to purchase with just a 5% deposit.

• Remove income and place caps, making the scheme widely accessible.

• Introduce higher property price caps, aligning with today’s housing market.

This expansion is designed to make home ownership more achievable, particularly in high-demand cities where saving a 20% deposit is out of reach for many.

Next Steps

If you’re considering buying your first home, it may be worthwhile to start planning ahead of the October changes. Understanding how the scheme works, how much you may be able to borrow, and what properties fall within the new price caps can help you make informed decisions when the time comes.

How Lumière Financial Can Help

At Lumière Financial, we guide first home buyers through every step of the process — from understanding how the 5% scheme applies to you, to working with lenders and helping you feel confident about your first purchase.

If you’d like to explore your options or ask a few questions, we’re here to provide clear guidance and support.

Get in touch with us today to start mapping out your path to home ownership.