The 5% Deposit Scheme: What Changes on 1 October and How It’s Already Shaping House Prices

9/15/20253 min read

🏡 The 5% Deposit Scheme: What Changes on 1 October and How It’s Already Shaping House Prices

From 1 October 2025, big changes are coming for first home buyers in Australia. The federal government has expanded the First Home Guarantee (also known as the 5% deposit scheme), and experts say it could have major effects on housing demand and prices.

Here’s what’s changing, what we’ve seen so far in NSW and across the country, and what it could mean for the future of house prices.

🔧 The Key Changes from October

Starting October, the 5% deposit scheme will look very different:

Unlimited places – Previously, only a capped number of buyers could access the guarantee. From now on, there’s no limit.
No income caps – First home buyers can now qualify regardless of their household income.
Higher property price caps – The maximum property value that can be purchased under the scheme has been lifted. In Sydney and parts of regional NSW, for example, the cap rises from $900,000 to $1.5 million. Other states also see significant increases.
5% deposit with no LMI – Buyers can purchase with just 5% down and avoid Lenders Mortgage Insurance, because the government will guarantee up to 15% of the loan.

📈 What We’re Seeing in NSW and Across Australia

Even before the official start date, the announcement of the scheme has already affected the market:

Increased buyer activity – More first home buyers are attending inspections and auctions, knowing that they’ll soon be able to buy with a smaller deposit.
Upward price pressure in Sydney – Suburbs that were previously out of reach under the old $900k cap are seeing stronger interest. With the new $1.5m limit, demand has shifted toward middle-ring suburbs and regional centre that now fall within budget.
Nationwide ripple effect – Other capitals like Melbourne, Brisbane and Perth are also expected to feel the lift in buyer demand. While prices there are lower than Sydney, the raised caps make higher-value homes more accessible to first home buyers.

🔮 What This Could Mean for Future Prices

The changes could play out in a few ways:

Short-term price growth – As more buyers enter the market earlier, competition is likely to push up prices, especially in suburbs already under pressure.
First home buyers competing with investors – With broader eligibility, first home buyers may be competing more directly with investors and upsizers for the same properties.
Regional demand growth – Regional towns within commuting distance of capital cities could become hotspots as buyers chase affordability under the higher caps.
Medium-term stabilisation – Economists suggest that while prices may rise quickly at first, the long-term impact could be more modest if housing supply increases and market conditions balance out.

⚠️ What Buyers Need to Watch

High loan amounts – Buying with a 5% deposit means taking on a larger loan. Repayments will be higher and more sensitive to interest rate movements.
Potential bidding wars – More buyers with access to government support may lead to more competitive auctions.
Affordability risks – Just because you can borrow more doesn’t mean it’s financially comfortable long term.

✅ Smart Steps for First Home Buyers

Get pre-approval early so you’re ready when the right property comes up.
Factor in not just the deposit, but also stamp duty, legal fees and moving costs.
Explore a range of suburbs — areas just beyond high-demand pockets may offer better value.
Speak with a mortgage broker who understands the new scheme and can compare lenders offering suitable loans.

🌏 Final Takeaway

The 5% deposit changes from October will open doors for thousands of Australians who were previously locked out of the market, especially in NSW where price caps have jumped the most. While this makes home ownership more achievable for many, it also means more competition and potential upward pressure on prices.

If you’re a first home buyer or considering refinancing in this new environment, the smartest move is to get advice early and be prepared.

👉 Next Step: Book your free consultation to find out how the October 5% deposit changes could help you buy sooner — and how to protect yourself from overpaying.