The Home Guarantee Scheme, which allows first home buyers to enter the property market with a 5% deposit, has been expanded earlier than previously scheduled. This change may affect the timing of purchase decisions for some buyers.

The Home Guarantee Scheme (HGS) enables eligible first home buyers to purchase property with a 5% deposit without paying lenders mortgage insurance.

Currently, the scheme is available to first-time buyers who satisfy criteria relating to income and property price, along with annual limits on the number of participants.

Previously scheduled for expansion in 2026, the HGS will now be made available to all first home buyers from 1 October 2025.

With these changes brought forward, more first home buyers are expected to become eligible under the scheme.

How the 5% deposit scheme works

As home prices have risen, accumulating funds for a 20% deposit has become increasingly challenging.

Consequentially, the HGS has seen significant uptake since its introduction. Since 2020, the scheme has facilitated over 230,000 first home purchases with deposits as low as 5%.

Although the HGS does not provide direct financial payments, it offers savings by eliminating the need for lenders mortgage insurance, as the federal government guarantees part of the loan. This can amount to substantial cost savings.

How the 5% deposit scheme is changing

From 1 October, all first home buyers will be eligible to apply for the HGS with the existing caps on property types and income requirements will be removed. Additionally, eligible property price limits under the scheme will increase, expanding eligible housing options.

Further, the Regional First Home Buyer Guarantee will transition to the First Home Guarantee.

Why consider bringing forward buying plans?

Some organisations, such as the Insurance Council of Australia, suggest that expansion of the HGS could lead to an increase in house prices by up to 10% in preferred markets within the first year. National projections estimate price growth between 3.5% and 6.6%.

This is based on anticipated increased demand in an already limited housing market.

For those considering home ownership now, applying for the current HGS scheme is possible before 1 October, subject to existing income and property price limits.

Contact us for further information regarding eligibility for a home purchase with a 5% deposit.

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