The broking industry has questioned whether changes to the Home Guarantee Scheme will actually address long-term affordability issues for first home buyers.
Ahead of its expansion on Wednesday (1 October), mortgage brokers have been weighing in on the impending changes to the Home Guarantee Scheme.
From 1 October, the government will lift the income and place limits on the First Home Guarantee Scheme, which enables eligible first home buyers to access a 5 per cent deposit without paying lenders mortgage insurance (LMI) because the government guarantees the remainder.
While the changes have received praise from some in the broking industry, others have highlighted potential risks and drawbacks to the scheme.
Speaking to The Adviser ahead of the expanded scheme implementation, Eva Loisance, principal at Sydney-based brokerage Finni, believes the scheme will improve affordability in the short term, but could inflate future house prices.
She said: “[The scheme] lowers the barrier to entry. Removing income caps and increasing property price thresholds means more buyers can access the market with just a 5 per cent deposit and avoid lenders mortgage insurance (LMI), which can save them tens of thousands upfront.
“That’s a game changer for clients who are otherwise locked out due to deposit constraints.”
However, Loisance cautioned that the scheme does not necessarily address long-term affordability issues.
“Affordability isn’t just about access, it’s about sustainability. With price caps now reaching up to $1.5 million in Sydney, we’re seeing borrowing power stretched to its limits,” Loisance said.
“Monthly repayments on these loans can exceed $8,000, which is well beyond what the average income can support. So, while the scheme improves access, it doesn’t necessarily make housing more affordable in the long run.
“We have seen those schemes also pushing prices up in the past, so it’s great if you can get in quick, not so great after a few years.”
Tom Uhlich, director and mortgage broker at Boss Money, told The Adviser that more buyers entering the market could inflate prices: “The obvious issue is the demand imbalance. It will bring more buyers to the sub-$1 million market chasing the same number of houses, which will push prices up.”
Uhlich also raised the issue of stamp duty for first-time buyers under the scheme.
“Yes, the property price caps have been increased, but stamp duty thresholds have not moved at all (because that’s the money maker for the government),” he continued.
“As property values rise, so does the stamp duty, and it remains one of the biggest upfront barriers for first home buyers.
“The government can talk about helping buyers with deposit guarantees, but stamp duty is still the cash cow for state governments. While it is pushed as a 5 per cent scheme, it’s more like 8 per cent - 9 per cent.
“We have had some interest in the new scheme in Brisbane, but once you do the numbers, they just don’t have the additional funds to cover stamp duty.”
‘We have seen this pony before’
Critics of the Home Guarantee have warned it could increase taxpayer exposure, heighten default risks, and distort the market by artificially boosting demand in certain price brackets and regions.
Boss Money’s Uhlich reflected that the scheme may not bring a long-term solution for first home buyers.
“It’s a political win in the short term. As I have been preaching to all those raving about the grant, stamp duty thresholds are still below the property gaps, this could very well stop too many using the new scheme,” Uhlich said.
“[At the] end of the day, the scheme will appear to help buyers but we have seen this pony before, government schemes boost demand, prices jump and affordability drops.”
Similarly, Loisance questioned whether the Home Guarantee Scheme offers a genuine long-term solution.
“It’s a short-term fix with long-term implications. The scheme addresses demand but not the underlying supply crisis. We risk inflating prices further,” Loisance said.
Last week, the RBA flagged this concern, and Loisance added it could benefit sellers more than buyers.
“From a broker’s lens, we must prepare our client for resilience. That means stress-testing scenarios, educating them on repayment obligations, and ensuring they’re not over-leveraged,” she said.
“I think the scheme is a powerful tool, but it must be paired with broader structural reforms planning approvals, infrastructure investment, and incentives for new builds to truly shift the affordability dial.”
When changes to the Home Guarantee Scheme were announced last month, Finance Brokers Association of Australia (FBAA) managing director Peter White welcomed the changes, but also flagged affordability concerns.
“While this is an important part of the equation, there are other crucial elements to improving affordability that also need attention, including bringing on more housing supply,” White said.
Commenting on the changes, Mortgage and Finance Association of Australia (MFAA) CEO Anja Pannek said: “We welcome the broadening of lenders, including smaller, customer-owned and regional banks.
“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.”
[Related: Industry reacts to Home Guarantee Scheme expansion]
