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3h ago

First Home Guarantee Expansion Takes Effect With 5% Deposits, Higher Caps and Unlimited Places

Economists warn the demand-side expansion could lift entry-level prices beyond Treasury’s modest forecast.

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Analysis shows the government's new First Home Guarantee scheme could slash years off savings times — but experts warn it could come at a cost.

Overview

  • From 1 October, first-home buyers can access 95% loans with no income cap, raised city price caps and no limit on places under the expanded federal scheme.
  • New property caps are $1.5 million in Sydney, $950,000 in Melbourne, $1 million in Brisbane and $850,000 in Perth, though buyers must still meet lenders’ serviceability tests.
  • Domain estimates the lower deposit could cut saving times by years, including roughly seven years in Sydney and about six in Melbourne, based on average two‑income households.
  • Treasury projects only a 0.5% house‑price uplift over six years, but Deloitte’s Stephen Smith expects a stronger 3–5% rise where entry‑level demand is concentrated.
  • Independent modelling indicates high incomes are needed to buy at the caps with a 5% deposit, such as about $290,000 combined income for a Sydney couple, underscoring repayment and negative‑equity risks on 95% loans.