ISCOVER
The building industry body has estimated the Home Guarantee Scheme’s expansion will shave years off the time needed to save for a home.
The Housing Industry Association (HIA) has welcomed the expansion of the Home Guarantee Scheme, stating it believes the changes will reduce the time to save a deposit by up to four years.
On 25 August, the Albanese government announced plans to bring forward the start of the First Home Guarantee Scheme to 1 October 2025, three months earlier than originally planned.
The scheme will give an unlimited number of eligible first home buyers access to a 5 per cent deposit guarantee, removing the income and place caps that were previously in place.
The government also raised the scheme’s property price limits in reaction to the increase in average house prices.
On average, the scheme’s expansion will reduce the time and cost burden on first home buyers by 1.7 years or around $25,000, the HIA said.
Commenting on the scheme, HIA senior economist Tom Devitt noted that the latest expansion will allow first home buyers to purchase a home without having to pay lenders mortgage insurance (LMI).
“First home buyers pay between $25,000 and $30,000 in LMI to purchase an average home. Because this cost is paid up-front, it is effectively added to the loan and is repaid over 25 years, inflating the real cost of LMI,” Devitt said.
“Removing LMI reduces the timeframe to save the deposit for a first home buyer by up to four years.
“The real costs of LMI to the economy are significantly higher than the upfront cost to the first home buyer.”
The property body also recently released its HIA Affordability Index for the June 2025 quarter, suggesting it expects changes to the guarantee scheme to put downward pressure on home prices and claiming it will add to the supply of homes, without adding to demand.
However, the HIA added that Treasury’s conservative estimates showed the scheme will lead to a “modest rise in home prices initially”, as first-time buyers shift out of the rental market into home ownership, before changes create incentives for more home building.
“Over the medium- to long-term, demand for housing is only derived from a change in population or the number of people per home. As this policy doesn’t change either of these variables, it has no impact on demand,” Devitt said.
Industry split on HGS changes
Planned changes to the Home Guarantee Scheme have been generally met with cautious optimism from the mortgage and finance industry.
Finance Brokers Association of Australia (FBAA) managing director Peter White welcomed the reforms, saying they will help younger home buyers, although he cautioned that improving affordability also needs attention.
Similarly, Mortgage and Finance Association of Australia (MFAA) CEO Anja Pannek said that the broadening of lenders would ensure that first home buyers get the support they need when buying a home.
However, Prakash Rai, a mortgage broker at Home Loan Experts, described how more buyers entering the market would likely push up house prices.
“There is a large segment of borrowers who are on good incomes but were still saving for a deposit; this will introduce a new buyer segment in the market,” he said.
“I am guessing many people who had capacity now also have the deposit they need. This will only result in more buyers and property prices rising with new competition.”
Property Council of Australia CEO Mike Zorbas has also suggested that, with the average age of first home buyers in capital cities approaching 40, “every available lever” should be pulled to get more young people into a home.
“You stack yesterday’s [August’s] supply boosters on top of helping first home buyers bridge the deposit gap, and we have a better chance of making our welcome 1.2 million homes target,” Zorbas said.
However, Zorbas warned that the scheme should be continually reviewed.
“That said, and I cannot emphasise strongly enough, scheme design will need to be carefully reviewed on a regular basis from 1 July 2026 to ensure key housing markets do not overheat,” Zorbas said.
Housing accessibility is a major issue in Australia, with research published this week showing housing affordability for first home buyers at its lowest since records began.
[Related: Industry reacts to Home Guarantee Scheme expansion]
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