What's changing for the home guarantee scheme for first home buyers in 2025

What’s changing in the Home Guarantee Scheme from 1 October 2025 — What WA first home buyers need to know

 

From 1 October 2025, the Australian Government is rolling out sweeping changes to the Home Guarantee Scheme that aim to make it easier for first home buyers to enter the property market. These changes are significant, especially for buyers in WA, and shift many of the old constraints (income caps, limited places, lower property caps). In this post, I walk through what’s changing, why it matters for first home buyers in Western Australia, and what to watch out for.

 

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What is the Home Guarantee Scheme?

 

Before diving into the changes, here’s a quick recap of how the scheme works (or worked) under the existing rules:

• The scheme helps eligible first home buyers obtain a home loan with a deposit of as little as 5%, avoiding the need to pay Lenders’ Mortgage Insurance (LMI). 

 

• Under the scheme, Housing Australia provides a guarantee to the lender — it is not a cash grant or deposit. If the borrower defaults and the property sale doesn’t cover the loan, Housing Australia pays a portion (up to a capped percentage) of the shortfall to the lender. 

 

• Historically, there were income caps, limits on how many people could participate each year, and property price caps (maximum property value eligible) that varied by state and region. 

 

• There were also special streams (e.g. the Regional First Home Buyer Guarantee, Family Home Guarantee) that had slightly different rules or caps.

These rules, while helpful for many, still excluded many buyers — especially those with higher incomes or looking in pricier areas.

 

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Key changes effective 1 October 2025

 

As of October 1, many of the old limitations are being removed or relaxed. The updated scheme is much more open. Below is a summary of the major changes:

 

 

These are foundational shifts that open up access to many who were previously excluded due to income or location constraints.

 

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What this means for first home buyers in WA

 

Western Australia is in a particularly interesting position: property prices in Perth have been rising, and WA has its own state-level incentives and duty concessions. Here’s how the changes may impact WA buyers.

 

Expanded price caps = more homes in reach

 

One of the biggest wins for WA buyers is the uplift in property caps:

• Metropolitan / capital region of WA: from ~$600,000 to $850,000 

 

• Other / regional WA: from ~$450,000 to $600,000 

This means many more homes across Perth and regional WA will now qualify under the scheme. Buyers who were previously shut out because their target suburb or house was above the old cap may now be eligible.

 

Avoiding Lenders’ Mortgage Insurance (LMI)

 

Because the scheme guarantees a portion of the loan to the lender, eligible buyers with just a 5% deposit can avoid paying LMI, which is often a hefty additional cost when borrowing with less than 20% deposit.

 

Where LMI costs can run into tens of thousands, that is a tangible saving and makes the path to home ownership more accessible.

 

WA state-level incentives and duty / stamp concessions

 

First home buyers in WA already benefit from stamp duty exemptions and concessions under the state’s policies:

• From 21 March 2025, the WA Government increased the stamp duty exemption threshold for houses in Perth & Peel from $450,000 to $500,000, and increased concession thresholds (in Perth & Peel) from $600,000 to $700,000. Outside Perth & Peel, concession thresholds were increased up to $750,000. 

 

• Also, for off-the-plan purchases, duty concessions have been extended and thresholds increased. 

These state-level reliefs stack on top of the federal scheme, making WA somewhat more favorable for first home buyers relative to other states.

 

More competition, pricing pressure & affordability challenges

 

While the expanded scheme opens doors, it also introduces potential downsides:

• Increased competition for eligible homes: More buyers will now be able to bid in the same markets. That could drive up purchase prices and push buyers to “stretch” their budget. 

 

• Affordability in WA slipping: Even before these changes, WA’s housing affordability had worsened in recent quarters, meaning that borrowing larger amounts is becoming more of a strain relative to income.

 

• Risk of overextending: Just because you can borrow more doesn’t always mean you should. If interest rates rise or your financial circumstances change, smaller deposits carry higher risk of negative equity or mortgage stress.

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What first home buyers in WA should do now

 

If you’re considering buying your first home in WA, here are some steps and tips to get ready before, on, or after 1 October:

1. Check your eligibility now 
   Familiarise yourself with the eligibility rules (e.g. you must be a first home buyer, intend to live in the property, etc.). Some items remain unchanged. 

 

1. Speak your mortgage brokers to understand your position
   Having a conversation early in your home buying journey is always preferrable, this can help you set a goal or start the process.

 

1. Check the updated property caps for your postcode
   Use the Housing Australia cap-lookup tools to see whether your target home is eligible. 

 

1. Run your budget conservatively
   Just because more is “available” under the scheme, don’t stretch your borrowing to the maximum. Factor in interest rate rises, maintenance, insurance, and other costs.

   • Test your repayment buffer

   • Make sure you can handle higher rates or periods of financial stress

   • Factor in stamp duty, transfer costs, mortgage-related fees

 

1. Weigh options: scheme vs non-scheme (or state schemes like Keystart)
   In WA, there are sometimes state-backed options (e.g. Keystart), shared equity models, or other concessional loans that may offer better terms depending on your situation. Compare all available paths. 

 

1. Act promptly on 1 October (or soon after)
   If your property is eligible and your finances are in order, be ready to lodge or reserve your scheme place quickly. With increased demand, banks and lenders may experience high volumes.

 

1. Do your due diligence on the property itself
   Even more than ever, inspect, get pest/building reports, verify title, check strata (if applicable), plan for upkeep costs. Don’t let the deal distract from underlying property risk.

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What to watch & 

 

While the changes are very favourable for access, several caveats and risks deserve attention:

• Interest rate risk: Smaller deposit loans tend to attract higher interest margins or greater sensitivity to rate rises.

 

• Higher competition: More buyers in the same price bracket could push up prices, especially in highly desirable suburbs.

 

• Other costs remain: Stamp duty, legal fees, inspection costs, insurance, maintenance, strata fees (if applicable) still apply.

 

• Not for investors: The scheme is intended for owner-occupation, not for investment properties.

 

• State policy changes: State governments can change stamp duty concessions, or housing supply policies, which affect overall affordability and incentives.

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Conclusion

 

The 1 October 2025 changes to the Home Guarantee Scheme represent one of the most significant shifts in first home buyer policy in years. For WA buyers, the expanded property caps, removal of income restrictions, and unlimited scheme places open many more opportunities to enter the property market sooner, with one of the biggest premiums being the avoidance of LMI costs.

 

That said, opportunity is not risk-free. Buyers must still exercise caution around budgeting (especially under future interest rate changes), property choice, and ensuring they don’t overextend themselves.

 

If you want to chat about whether the time is right for you, book and appointment with one of the G&T Finance team via Book Appointment above.