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Overhauled on 1 October 2025, the scheme was opened up to all first home buyers, with income limits and caps on available places removed and property price caps increased. Since then, 102,594 buyers have signed up to the federal government’s scheme.
One in two first home buyers nationally are now using a first home buyer scheme to get into the market, with more than 300,000 people helped since its inception.
Based on median property prices and assuming a 5 per cent deposit, the scheme has saved Australians more than $2.5 billion in lenders mortgage insurance (LMI) since 2022, including $1.4 billion in the past year alone.
For a buyer purchasing a home at the national median price with a 5 per cent deposit, that equates to an estimated LMI saving of around $23,700.
The federal government said the scheme was also performing strongly on repayments, with 99 per cent of borrowers either ahead of schedule or on track. Just 13 claims have been paid since its launch, while borrowers typically spend around 2.5 years on the scheme before moving off it.
Scheme in use across the country
Victoria recorded the highest uptake of the expanded scheme over the past year, with 33,413 first home buyers using it, followed by NSW with 28,158 and Queensland with 20,125.
Together, the three states accounted for almost 80 per cent of the 102,594 buyers who joined the scheme in the past 12 months.
Since Labor came to power, more than 280,000 first home buyers have accessed the scheme, led by Victoria (89,375), NSW (76,285) and Queensland (61,675).
Uptake was lower in the smaller states and territories, with 1,588 buyers in Tasmania and 502 in the Northern Territory accessing the scheme over the past year.
From surging prices to serviceability
In the year since the expanded scheme was launched, issues facing FHBs have shifted from surging prices to serviceability constraints.
Before the four interest rate hikes, the federal budget and falling house prices, lower-priced homes across the country were surging in value.
Cotality found in January that during the December quarter in 2025, homes that fell within the Deposit Scheme caps grew by 3.6 per cent, compared with 2.4 per cent growth for homes above the caps.
Over the same period, 89 per cent of suburban areas recorded faster growth in properties priced within the caps than in higher-priced homes.
Brokers speaking to Broker Daily at the time said the uptick in prices was due not just to FHB demand, but also investors targeting the same part of the market in response to the growth. They also noted that the surging prices were creating a cost that was obscured for FHBs – stamp duty.
Fast forward to today and a new set of issues faces FHBs, namely serviceability constraints.
House prices have now fallen for a sixth consecutive month, with values down 5.2 per cent from their March peak. But brokers said this has offered little respite for FHBs, as serviceability constraints bite harder.
According to Cotality, the cumulative impact of four rate hikes this year has cut borrowing capacity by almost $90,000. Brokers said this has helped keep FHBs out of the market.
Sarah Smelt, director of Finance Society, said the 5 per cent Deposit Scheme could not remedy every problem faced by FHBs.
“The 5 per cent Deposit Scheme can solve the deposit problem, but it doesn’t solve the borrowing capacity problem. I think that’s probably the biggest misconception,” she said.
“You still have to be able to service the loan. For the right buyer these schemes are incredibly helpful, but serviceability can still be the thing that determines what they can actually buy.”
Similarly, Samantha Harvey, senior mobile broker for Aussie, said market conditions had affected the scheme’s ability to deliver for FHBs, particularly single applicants.
“I’m Sydney-based, and having enough deposit to qualify for the 5 per cent Deposit Scheme is one thing; having the borrowing capacity to buy is another. For a single first home buyer, borrowing power simply doesn’t go very far in Sydney,” Harvey said.
“I’m seeing more interest in the Help to Buy Scheme, as well as more first home buyers looking to purchase jointly with family members. The deposit hurdle might be getting easier but for some buyers borrowing capacity has become the bigger challenge.”
The squeeze on borrowing capacity comes as housing affordability reaches record lows. A median-income household earning around $125,000 can afford just 12 per cent of homes sold in FY2025–26, according to REA Group’s Housing Affordability Index.
Together, these pressures have contributed to a slump in mortgage demand among FHBs.
Credit reporting bureau Equifax found that overall mortgage demand fell 14.1 per cent year on year compared with August last year, but the contraction among FHBs was steeper, at 20.1 per cent nationally in the same period.
However, Smelt said FHBs were not out of the market but may be waiting for a more opportune time to enter.
“I don’t think first home buyers have disappeared at all,” she said.
“We recently held our biggest first home buyer seminar in five years, which I think says a lot. People still really want to buy. They just want to understand what they’re doing before they jump in. We’re getting lots of questions around borrowing capacity, repayments, deposits, the government schemes and what happens if rates move again.
“So yes, buyers are probably a little more cautious, but I actually think that’s making them more educated rather than just putting them off altogether.”
[Related: WA brokers warn of limitations of Help to Buy scheme]
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