First-home buyers could get into the property market with a 5% deposit within weeks after the federal government brought forward its expanded low-deposit scheme.
The federal government has announced its expanded Home Guarantee scheme will start from 1 October 2025, rather than next year.
Under the updated scheme, the government will guarantee a portion of a first-home buyer’s home loan, so they can purchase a home with a deposit as low as 5% and avoid paying lenders mortgage insurance (LMI).
The move has been welcomed by housing groups, and comes after the government promised to do more to build additional homes and get more people into home ownership at last week’s economic roundtable in Canberra.
But there were concerns about the expanded scheme’s lack of income caps for eligible first-home buyers, and whether it may end up accelerating competition for homes and drive prices even higher. Previously, first-home buyers with higher incomes could not access the scheme.
Prime minister Anthony Albanese said they wanted to help young people and first-home buyers achieve the dream of home ownership sooner.
“Bringing the start date of our 5% deposit scheme forward will do just that,” he said.
“Getting more Australians into their own home quicker, while saving them money along the way.”
The changes will allow all first-home buyers to have access to the scheme, with no limit on the number of places and no income caps. Property price caps will also be increased to better reflect house prices in different cities and regions.
For the average first-home buyer, the scheme is expected to cut years off the time it takes to save for a deposit and save tens of thousands of dollars on LMI.
In the first year alone, first-home buyers using the scheme are expected to avoid around $1.5 billion in potential LMI costs.
Under the expanded scheme, a first-home buyer in Brisbane would be able to purchase a $1 million home with a $50,000 deposit.
They could save up to 10 years off the time it would take to save for a deposit and save about $42,000 in LMI, according to government estimates.
Buyers looking to access the scheme will still be assessed by lenders on their ability to service a loan.
But the change has been criticised by shadow housing minister Senator Andrew Bragg, who told the ABC on Monday that there should be caps on the program.
“This is an uncapped scheme which is available to billionaires, or the children of billionaires, if they want to use a government program,” he said.
“I think we’re getting to a point where Australia is becoming a ridiculous nation where the taxpayer is under-writing mortgage insurance schemes for extremely wealthy people. I think it’s bizarre and ridiculous.”
Other experts warned that supporting more first-home buyers with purchases at a time of severe housing shortages would just elevate prices.
The Housing Industry Association, Property Council and Urban Development Institute of Australia groups backed the move, agreeing it would help first-home buyers into the property market sooner.
Housing Industry Association managing director Jocelyn Martin said the scheme had helped more than 210,000 Australians get into a home of their own so far.
“Previously the scheme has been capped at 50,000 new places each year, but today’s announcement will mean there are no caps or income limits and property prices have been adjusted in line with average house prices in both metropolitan and regional areas,” Ms Martin said.
“This will mean more Australians can access the scheme and get into housing sooner.”
The federal state and territory governments have faced significant pressure to make housing more affordable, and help Australians into home ownership.
It has committed more than $43 billion to housing since its election in 2022, much of which has gone to building more homes and schemes to help Australians onto the property ladder.
According to the PropTrack Housing Affordability report published last September, housing affordability was at its worst level on record.
The government also announced plans to allow more lenders to offer the scheme to borrowers, opening up the scheme to smaller, customer-owned and regional banks.
Source: First-home buyer win as low deposit loans fast-tracked, Benn Dorrington for realestate.com.au