The First Home Guarantee has undergone major updates from October 1, 2025, making it easier than ever for first-time buyers to step onto the property ladder. With expanded eligibility, higher property price caps, and more opportunities across Australia, these changes are reshaping the way first-time homeowners approach buying. Understanding what’s new can help you make the most of the scheme and plan your first home purchase with confidence. Stay with JAS Stephens, one of the oldest real estate agencies in Victoria, to review what is happening in Melbourne’s property market.
Breaking News: Major Changes to Australia’s First Home Guarantee (FHG)
As of October 1, 2025, significant changes have been implemented to Australia’s First Home Guarantee (FHG) scheme, aimed at making homeownership more accessible for first-time buyers.
Based on realestate.com.au, “Melbourne’s housing market has reached new heights, with median dwelling values climbing to $839,000 in September 2025, surpassing the previous peak in March 2022. This resurgence comes despite a significant exodus of property investors due to increased land taxes and compliance costs. Factors such as lower interest rates, expanded homebuyer incentives, and a constrained housing supply have contributed to renewed buyer confidence and heightened competition, particularly among first-time buyers and returning investors.”
So what changed exactly? Key Changes to the First Home Guarantee
- 5% Deposit with No Lenders Mortgage Insurance (LMI): Eligible first-home buyers can now purchase a property with a deposit as low as 5% without the need to pay LMI, potentially saving tens of thousands of dollars.
- Removal of Income Caps: The scheme has eliminated income caps, allowing more Australians, including higher-income earners, to qualify. Previously, singles earning above $125,000 and couples earning above $200,000 were ineligible.
- Increased Property Price Caps: Property price thresholds have been raised to better reflect market conditions. For instance, in Melbourne, the cap has increased to $950,000, while in Sydney, it has risen to $1.5 million.
- Unlimited Number of Places: The scheme now offers an unlimited number of places, removing the previous annual cap of 35,000 applicants.
(Sources: https://www.housingaustralia.gov.au/media/unlimited-places-higher-property-price-caps-first-home-buyers-1-october-2025 + https://www.theguardian.com/australia-news/2025/sep/30/first-home-guarantee-expands-buy-loan-deposit-first-home-buyers)
Here’s a clean, visually appealing bar chart comparing previous vs. new First Home Guarantee features in Melbourne (effective 1 October 2025).
- Blue bars = Previous scheme
- Orange bars = New scheme
- LMI and income caps are represented as “Required/Waived”
It clearly shows reductions in deposits, removal of income caps, a higher property price cap, and unlimited scheme places.
Victoria Property price caps from 1 October 2025
| Location | Was | Now |
| VIC – capital city and regional centre | $800,000 | $950,000 |
| VIC – other | $650,000 | $650,000 |
(Source: https://www.housingaustralia.gov.au/)
How the First Home Guarantee Changes Affect Buyers
| Increased Housing Demand | Experts suggest that these changes could lead to heightened competition in the housing market, potentially driving up property prices, especially in sought-after areas. |
| Increased Housing Demand | Savings on LMI: First-home buyers could save significant amounts by avoiding LMI. For example, purchasing a $1 million home with a 5% deposit could save up to $42,000 in LMI costs |
| Access to More Suburbs | The increased property price caps open up more suburbs for first-home buyers, providing greater choice in their home search |
Will the First Home Guarantee Increase Home Ownership?
The updated guarantee significantly lowers the deposit hurdle, slashing it by around 75%. This means many buyers will be able to enter the property market much sooner. For example, Domain’s research suggests that in cities like Melbourne, Brisbane, and Adelaide, the average saving time could shrink from more than eight years to just two.
Currently, around 110,000 Australians purchase their first home each year, with roughly 50,000 using the income-capped guarantee. With the expanded scheme, the government expects an additional 30,000 buyers will take advantage of the program.
However, the long-term impact on ownership rates may be modest. Research by Lateral Economics suggests home ownership might only increase from 66% to 67%, since many participants would have eventually purchased anyway by paying lenders’ mortgage insurance (LMI) or relying on family assistance.
It’s also worth noting that lower-income earners who are unable to service a mortgage won’t see their borrowing capacity change. In fact, some may face challenges if the scheme drives property prices higher, according to research commissioned by the Insurance Council of Australia.
Will the First Home Guarantee Push Up Melbourne Real Estate Prices?
The expansion of the First Home Guarantee (FHG) is expected to place upward pressure on Melbourne real estate prices, particularly in the entry-level market where first-home buyers are most active.
Why Melbourne Real Estate Prices Could Rise
More Buyer Demand: With deposit requirements reduced to just 5% and income caps lifted, more buyers can now enter the real estate market sooner. According to research by the Insurance Council of Australia, property prices in targeted segments could rise by 5.3% to 9.9% by 2026.
Tight Housing Supply: Melbourne’s real estate supply cannot keep pace with increased demand. With property price caps under the scheme lifted to $950,000, more homes now qualify, further boosting competition in already tight markets.
Short-Term Price Pressure: Analysts warn that in the first years of the scheme, the benefits of lower deposits may be offset by rising real estate prices, as buyers “bid up” limited stock.
Why the Impact May Be Limited
- Many buyers who qualify for the guarantee might have purchased anyway through lenders mortgage insurance (LMI) or family assistance, meaning the scheme accelerates demand rather than creating it.
- Higher interest rates may limit borrowing power, placing a cap on how much real estate prices can rise.
- Some Melbourne suburbs with more new housing supply may not feel as much price pressure compared to inner-city or high-demand areas.
Eligibility Criteria for the First Home Guarantee in Victoria
To qualify for the First Home Guarantee in Victoria, applicants must meet the following criteria:
| Citizenship or Residency | Applicants must be Australian citizens or permanent residents. |
| Age Requirement | Applicants must be at least 18 years old. |
| First-Time Buyer Status | Applicants must be first-time homebuyers or have not owned or had an interest in property in Australia in the last 10 years. |
| Owner-Occupier Requirement | The property purchased must be intended for owner-occupation. |
| Deposit | A minimum deposit of 5% of the property’s value is required. |
| Property Price Caps | There are specific property price caps depending on the location within Victoria. For instance, in metropolitan Melbourne, the cap is $950,000. |
| Income Limits | As of the latest updates, income caps have been removed, allowing more individuals to qualify. |
These changes aim to make homeownership more achievable for a broader range of first-time buyers in Victoria.
How to Apply for the First Home Guarantee in Victoria
To apply for the First Home Guarantee in Victoria:
- Choose a Participating Lender: Select a bank or financial institution that participates in the First Home Guarantee scheme.
- Prepare Required Documents: Gather necessary documents such as proof of identity, income, and evidence of first-time buyer status.
- Submit Application: Apply through the chosen lender, who will assess your eligibility and assist in the application process.
- Property Search: Once approved, you can begin searching for a property within the price caps applicable to your area.
It’s advisable to consult with a mortgage broker or financial advisor to navigate the application process effectively.
How the First Home Guarantee Helps Cut Costs for Buyers
The First Home Guarantee (FHG) reduces the upfront financial burden for first-home buyers in several key ways:
- Lower Deposit Requirement
- No Lenders Mortgage Insurance (LMI)
- Access to More Affordable Financing Options
- Expanded Property Price Caps
Overall, the FHG makes entering the property market more attainable and reduces some of the biggest upfront costs that often prevent first-home buyers from purchasing a home.
Smaller Deposits Mean Higher Repayments
Here’s an example of how the size of your deposit affects borrowing costs for a home priced at $903,111:
| Deposit Size | Loan Amount | Monthly Repayments | Total Interest Paid |
| 20% Deposit ($180,622) | $722,489 | $4,216 | $795,361 |
| 5% Deposit ($45,156) | $857,955 | $5,007 | $944,491 |
Key Takeaways:
- A smaller deposit increases your loan amount, which leads to higher monthly repayments.
- Over a 30-year loan term at a 5.75% interest rate, the total interest paid can rise significantly.
(Source: Analysis based on RBA and Cotality data via Finder.)
What This Means for Melbourne Real Estate
Overall, the First Home Guarantee is likely to drive real estate price growth in Melbourne, especially in affordable suburbs popular with first-home buyers. However, the gains in home ownership may be modest, as higher competition could reduce the affordability benefits the scheme was designed to deliver.
How JAS Stephens Can Help You Navigate the Market
At JAS Stephens, we understand that government changes like the First Home Guarantee can create both opportunities and challenges for buyers. While the scheme may place upward pressure on Melbourne’s real estate prices, it also opens the door for many first-home buyers to enter the market sooner than expected.
That’s where we come in. With over 100 years of experience, our team specialises in Melbourne’s Inner West suburbs, helping buyers discover the right property in areas like Seddon, Yarraville, Footscray, Williamstown real estate and more. We provide expert guidance on local market trends, property values, and negotiation strategies, ensuring you’re positioned to make the most of your buying power.
Whether you’re a first-home buyer using the new guarantee or a seasoned investor, our deep knowledge of the Inner West real estate market allows us to match you with homes that fit both your budget and lifestyle.