While tens of thousands of Australians will realise their homeownership dreams under HGS expansion, demand could send house prices even higher
Australia’s broking associations have welcomed the Labor Government’s decision to bring the Home Guarantee Scheme expansion forward by three months.
Originally scheduled for January 2026, the HGS expansion will now go live on 1 October, 2025.
Under the scheme, every first-home buyer in Australia, regardless of income, will be able to purchase a home with just a 5% deposit. The government will guarantee the remaining three quarters of an 80% LVR loan, avoiding the need for costly Lenders Mortgage Insurance.
Property price caps will increase to $1.5 million in Sydney, $950,000 in Melbourne, and $1 million in Brisbane and the ACT. Participation caps will also be removed, meaning there will be no limit to who can access the scheme.
Peter White (pictured, left), managing director of the Finance Brokers Association of Australia (FBAA), welcomed the move.
"This decision will put more younger Australians within reach of realising their home ownership dreams,” said White. “It's good news for borrowers and good news for brokers, who will be best placed to assist first time buyers through the process, and ensure they have a product suited to their needs.”
The government has also instructed Housing Australia to promote greater diversity among lenders participating in the HGS, a move welcomed by the Customer Owned Banking Association (COBA).
“More customer-owned banks on the HGS panel will create a more dynamic, inclusive, and competitive market. Ultimately, this increased competition and choice will benefit first-home buyers,” said COBA chief executive Michael Lawerence (pictured, right).
Anja Pannek (pictured, centre), chief executive of the Mortgage and Finance Association of Australia (MFAA), also praised the move to diversify the HGS lender panel.
“We welcome the broadening of lenders, including smaller, customer-owned and regional banks,” said Pannek. “It’s crucial that the scheme operates with lenders who partner with mortgage brokers. This will ensure that first home buyers get the expert guidance and support they need through their home financing journey.”
The MFAA also did the courtesy of outlining the new property price cap increases, effective from 1 October:
- NSW – capital city and regional centre – rises from $900,000 to $1,500,000
- NSW – other – rises from $750,000 to $800,000
- VIC – capital city and regional centre – rises from $800,000 to $950,000
- VIC – other – $650,000, no change
- QLD – capital city and regional centre – rises from $700,000 to $1,000,000
- QLD – other – rises from $550,000 to $700,000
- WA – capital city – rises from $600,000 to $850,000
- WA – other – rises from $450,000 to $600,000
- SA – capital city – rises $600,000 to $900,000
- SA – other – rises from $450,000 to $500,000
- TAS – capital city – rises from $600,000 to $700,000
- TAS – other – rises from $450,000 to $550,000
- ACT – rises from $750,000 to $1,000,000
- NT – $600,000, no change
Experts sound alarm over soaring house prices
While the HGS expansion has been welcomed by the mortgage industry, experts raise raised concerns that it could push property prices even higher.
Independent analyst Cameron Kusher told The Guardian that the scheme was “only going to drive prices higher and increase competition for the housing stock”.
According to Treasury estimates, the HGS scheme will only add 0.5% to house prices over the next six years. Kusher said this estimate was “very hard to believe”.
Australia’s largest LMI provider Helia is also critical of the HGS expansion.
“The company believes that these policy changes are unlikely to sustainably improve levels of home ownership for FHB and introduce risks to government finances and the stability of the Australian financial sector,” Helia told shareholders last week.
Helia is facing testing times ahead as it navigates a home loan market that is increasingly turning away from LMI.
“The expansion of the Home Guarantee Scheme is expected to further reduce LMI industry premiums and make it more difficult for LMI providers to support lenders and borrowers,” Helia told MPA earlier this month.
