The New 5% Deposit Rules: What First-Home Buyers Need to Know From 1 October 2025
From 1 October 2025, the Australian Government will roll out major changes to the First Home Guarantee (FHBG), commonly referred to as the 5% Deposit Scheme. These changes aim to expand eligibility, increase flexibility, and make homeownership more achievable for first-time buyers across the country.
If you’re considering buying your first property or following market shifts closely, understanding what changes on 1 October 2025 — and how it differs from the rules before this date — is essential.
This two-part series breaks down everything you need to know.
Let’s begin with what the scheme is and how the updates reshape the path to homeownership.
- What Is the First Home Guarantee Scheme?
The First Home Guarantee is part of the broader Home Guarantee Scheme — an Australian Government initiative designed to help first home buyers purchase a property sooner with as little as a 5% deposit, without needing to pay Lenders Mortgage Insurance (LMI).
Here’s how it works:
- Eligible buyers provide a 5% deposit.
- Participating lenders offer a loan up to 95% of the property value.
- Housing Australia guarantees up to 15% of the purchase price, removing the need for LMI.
Before 1 October 2025, eligibility included:
- Australian citizens and permanent residents
- Must not have owned property in Australia in the last 10 years
- Income caps applied ($125,000 for singles / $200,000 for couples)
- Property price caps applied (varied by state and region)
- Joint applications allowed only for couples (married or de facto)
From 1 October 2025, these key conditions change dramatically.
- What Changes From 1 October 2025?
The Government is expanding the scheme earlier than originally planned to increase market participation and assist more Australians into homeownership.
Here are the major updates effective 1 October 2025:
✔ Income caps removed
Before this date, buyers had to meet strict income limits.
From 1 October 2025, there are no income caps, opening the scheme to higher-income earners who previously didn’t qualify.
✔ Place limits removed
Before this date, certain allocations were limited by location.
From 1 October 2025, any eligible first home buyer with a 5% deposit can apply, regardless of where they live.
✔ Significant increases to property price caps
To better reflect current market conditions, property caps rise substantially from 1 October 2025.
Examples:
- Sydney: $900,000 → $1,500,000
- Brisbane: $700,000 → $1,000,000
- Melbourne: $800k range → higher caps aligned with median values
- Regional areas will also benefit from revised caps
These increases give buyers access to more realistic purchase options in major cities and high-demand regions.
✔ Joint applications expanded
Before 1 October 2025, the scheme allowed joint applications only for married or de facto couples.
From 1 October 2025, joint applicants can include:
- Friends
- Siblings
- Relatives
- Parents and adult children
- Any two eligible applicants
This dramatically increases flexibility for shared homeownership.
✔ Regional First Home Buyer Guarantee absorbed into the expanded scheme
A single, simplified structure replaces the regional version of the program, making access for regional buyers more straightforward.
- How These Changes Improve Access to the Market
The updates from 1 October 2025 significantly shorten the time required to save a deposit.
A 20% deposit takes many years for the average first-time buyer. With rising rents and cost-of-living pressures, saving that much while renting is increasingly difficult.
The new scheme allows many buyers to enter the market years sooner.
Example: Melbourne
- Median home value: $803,242
- 20% deposit: $160,685 → approx. 9 years to save
- 5% deposit under the FHBG: $40,171 → approx. 2 years to save
Example: Sydney
- Median home value: $1,228,435
- 20% deposit: $245,687 → approx. 13 years
- 5% deposit: $61,422 → approx. 3 years
For many Australians, the difference between a 2–3 year saving plan and a 9–13 year plan is the difference between entering the market now — or potentially not at all.
- Could These Changes Affect Property Prices?
While the changes help buyers, experts suggest they could have an impact on prices.
Treasury modelling estimates the expanded scheme could add around 0.5% to property values over six years.
Other analysts believe the combination of:
- easier access,
- falling interest rates, and
- increased competition
might push prices higher, particularly in supply-constrained cities like Sydney, Melbourne and Brisbane.
This makes timing critical for buyers considering the scheme.
- What’s Next in Part 2?
In Part 2, we break down:
- who benefits most from the new rules,
- how eligibility works after 1 October 2025,
- what risks to consider when buying with a 5% deposit,
- how to prepare if you want to secure a place in the scheme,
- real-life scenarios showing how different buyers can take advantage.
Thinking of Buying Your First Home?
If you want to know whether you qualify under the updated rules from 1 October 2025, we can help. As your mortgage broker, we’ll explain your borrowing capacity, check participating lenders, organise pre-approval and guide you through every step.
Disclaimer: This blog offers general information on mortgages and finance for informational purposes only. It is not a substitute for personalized advice from a qualified mortgage professional or financial advisor. Use your discretion and seek professional guidance based on your individual circumstances.
