‘Unprecedented Demand’ as First Home Buyer Scheme Launches

According to the Australian Financial Review (AFR, Oct 2, 2025), the government’s expanded First Home Guarantee, which began on October 1, has triggered immediate demand from first home buyers. Mortgage brokers reported a surge of applications on day one, with some warning property prices in popular suburbs could jump well above Treasury’s forecast of a 0.5% rise.

The scheme, a key Labor election commitment, allows first home buyers to purchase with as little as a 5% deposit without paying Lenders’ Mortgage Insurance (LMI). Major changes include unlimited places, the removal of income caps, and higher property price limits — up to $1.5 million in Sydney and $950,000 in Melbourne.

Brokers told AFR the demand was “unprecedented,” with queues forming to submit applications. Economists also expect prices in more affordable suburbs and lower-quartile housing to rise as buyers rush to take advantage of the scheme. Some estimates, including a report by Lateral Economics, suggest property prices could increase between 3.5% and 6.6% in the first year before stabilising over time.

Treasury modelling, however, forecasts only a modest 0.5% national price rise over six years, with Prime Minister Anthony Albanese emphasising the scheme’s purpose is to help more young Australians into home ownership.

Insight

The expanded scheme is a powerful demand-side policy that removes some of the biggest hurdles for first home buyers: deposit requirements and LMI. But while it unlocks faster access to the market, it also risks fuelling short-term price growth — particularly for properties priced just under the new caps.

For early movers, the savings on LMI and lower deposit hurdle are significant. Yet the broader challenge remains supply: with approvals well below target, extra demand without new housing could make affordability even tougher in the years ahead.