This week it was announced that a scheme to allow all first home buyers to purchase a property with just a 5% deposit will start 3 months earlier than Labor promised at the Federal election.
From 1 October 2025, the Government is expanding the Home Guarantee Scheme with unlimited places, removal of means tested income caps, and higher property price caps, including a Sydney cap lifted to $1.5 million. This significantly reshapes how first home buyers finance purchases and will allow them to avoid Lenders Mortgage Insurance which is costly and particularly common for buyers in higher-priced markets such as Sydney’s Inner West and Inner City. These changes intersect with a market already characterised by rapid price growth and scarcity of stock.
What changes on 1 October 2025
From 1 October 2025, three headline changes take effect to the Home Guarantee Scheme: unlimited guarantees (removing annual place caps), removal of income limits, and higher property price caps, with Sydney’s cap increasing from $900,000 to $1.5 million, materially expanding the stock that can transact under the scheme. Government communications emphasise that the 5 per cent deposit pathway will be available to all first home buyers from this date, brought forward earlier than previously scheduled, with the objective of shaving years off deposit saving timelines and avoiding significant Lenders Mortgage Insurance costs at settlement.
What $1.5 million caps mean in Sydney
A $1.5 million cap in Sydney moves the scheme into alignment with prevailing price points for well-located middle-ring and many inner-ring apartments and townhomes, allowing more purchasing options for first home buyers who have stable income but smaller deposits. Practically, purchasers using the scheme can secure finance with a 5 per cent deposit on eligible properties up to $1.5 million in Sydney without Lenders Mortgage Insurance, broadening access to suburbs where previous $900,000 caps excluded large swathes of the Sydney market. Housing Australia’s announcement that places are effectively uncapped removes the prior lottery-like timing risk and supports planning confidence for borrowers and lenders across the October-to-Christmas trading window and into 2026.
Interaction of policy and prices
Expanding the scheme is designed to reduce deposit and Lenders Mortgage Insurance frictions, which will accelerate participation at price points up to the new caps; in Sydney, this includes a significant portion of inner-ring and middle-ring properties. Market commentators warn that increased purchasing capacity without a commensurate lift in new dwelling supply risks re-igniting price pressure, especially in low-vacancy, low-listing markets such as Sydney’s Inner West. The upshot is that while the scheme improves access for first home buyers, it will also intensify competition in eligible price bands unless broader supply-side measures materially expand stock.
Practical implications for buyers up to $1.5m
For price points up to $1.5 million, qualifying buyers can now plan for a 5 per cent deposit across a much broader set of Sydney suburbs and dwelling types, mitigating the Lenders Mortgage Insurance impost and potentially advancing purchase timelines by years. Lender panels participating in the program will process applications under the expanded rules from 1 October, with Housing Australia indicating streamlined access and uncapped places that remove prior bottlenecks. Given limited house supply below $2 million in the Inner West, many more first home buyers are now likely totarget quality apartments and townhouses within the $1.2–$1.5 million range to capture location benefits and liveability while leveraging the guarantee.
Strategy in the Inner West and Inner City
With policy-driven demand uplift possible from October, pre-approval and due diligence readiness will be vital to secure properties quickly, particularly in tightly held suburbs with low listing volumes
While the guarantee removes Lenders Mortgage Insurance, it does not replace prudent borrowing assessments; interest rate movements and serviceability buffers remain critical to long-term affordability and risk management. Price cap eligibility does not guarantee value: rigorous inspection, contract review, and strata and building inspections are essential to avoid overpaying or inheriting latent defects, particularly in older properties and apartment blocks with upcoming capital works. If market momentum towards a $1.5m unit median persists, buyers should anticipate bracket creep where competition lifts comparable stock out of reach, underscoring the need for disciplined search parameters and decisive execution.
How buyers’ agents add value
Experienced buyers’ agents provide real-time suburb-level intelligence on listing scarcity, off-market opportunities, and genuine value bands, which is particularly important when policy changes activate new cohorts of bidders in the same price ranges. Representation can improve buying outcomes through pre-auction positioning, accurate price modelling against recent sales, and structured risk management on building, strata, and contract issues, thereby sustaining value even as demand lifts. For purchasers leveraging the 5 per cent pathway, coordination between finance brokers, solicitors, and buyers’ agents will ensure that the October timeline is met.
Key takeaways for October 2025
- From 1 October 2025, the scheme has unlimited places, no income caps, and higher property price caps, with Sydney’s cap set at $1.5 million, allowing eligible buyers to purchase with a 5 per cent deposit and avoid Lenders Mortgage Insurance.
- The Inner West and Inner City already exhibit structural scarcity of sub-$2 million detached houses, evidenced by low stock and a price trajectory that is compressing the sub-$2 million segment, intensifying competition for semis, terraces, and larger apartments.
- The policy expansion will lift demand in eligible bands. Disciplined preparation, finance readiness, and expert representation will be crucial to secure quality assets without overpaying in an accelerating market.
For tailored acquisition strategies in Sydney’s Inner West and Inner City under the expanded Home Guarantee Scheme, we are ready to assist with data-led search, appraisal, and negotiation services to secure the right asset at the right price and risk profile.
