New data shows first home buyers using the 5% deposit scheme are seeing the fastest price growth
Properties priced below the federal government’s First Home Guarantee scheme caps are rising in value faster than more expensive homes. New analysis from Cotality, released in April 2026, found that homes under the price caps grew by 6.7% in value in the six months following the scheme’s October 2025 expansion. Properties above the caps grew by just 3.6% in the same period.
If you are a first home buyer weighing up whether to use the guarantee, this data gives you something concrete to consider. The scheme helped buyers get in sooner, and getting in sooner has, so far, paid off. But the picture is not entirely straightforward, and understanding the full context matters before you act.
What the scheme does
The First Home Guarantee allows eligible buyers to purchase a home with a 5% deposit without paying lenders mortgage insurance. The federal government guarantees the remaining portion of the deposit up to 20%, so lenders do not require LMI from the buyer upfront. This can cut years off the time needed to save a full deposit.
The government raised the property price caps significantly in October 2025. In Sydney, the cap lifted to $1.5 million. In Melbourne, it moved to $950,000. Other capitals and regional areas have their own thresholds. These increases opened the scheme to a much wider range of properties than were previously eligible, drawing many more buyers into the program.
Check the eligibility rules including guidance for permanent residents before you apply. Income caps, residency requirements, and whether you have previously owned property are all worth understanding early.
Affordable homes lead
Cotality’s analysis covers the six months from October 2025 to April 2026. Homes priced under the relevant price caps grew 6.7% in value. Homes above the caps grew 3.6%. That is a gap of more than three percentage points in six months, which is significant in any market.
Several factors explain it. Some first home buyers fast-tracked their purchases in anticipation that an expanded scheme would bring more competition into the affordable segment. Investors also became more active in the same price range, aware that demand was increasing and seeing potential for capital growth alongside yield.
The affordable segment was effectively hit by demand from two directions at once: first home buyers using the scheme, and investors responding to the same underlying price signal. When two different types of buyers compete for the same pool of properties, values respond accordingly.
The stimulatory effect
Cotality is cautious about how long this effect will last. Their analysis notes the scheme will gradually lose its stimulatory power as home values rise. More properties will exceed the price caps over time. And as values climb, the 5% deposit required also rises in dollar terms, which can make the finance hurdle harder for buyers still saving.
For those currently building their deposit toward the 5% threshold, every price increase in their target segment raises the goalposts slightly. A $950,000 cap in Melbourne means $47,500 at 5%. If the cap-eligible segment grows by 6.7%, your target property is now worth more and your deposit needs to be proportionally larger.
Economists have also noted more broadly that demand-side schemes, while helpful for individual buyers, can add upward pressure to prices in the segments they target. This does not mean the scheme is not worth using. It means the window where its benefits are most powerful may be time-limited.
Who benefits most
The scheme primarily benefits buyers who are financially ready but have been held back by the size of the deposit requirement. If you have a stable income, manageable debts, and can reach 5% genuine savings, the guarantee can significantly accelerate your path to home ownership.
Buyers who are still a year or more away from a 5% deposit, however, may find that the price growth the scheme has contributed to makes their target more expensive by the time they are ready. This is the core tension that economists flag when assessing demand-side housing incentives.
Whether the case for buying now rather than waiting is right for you depends on your individual financial situation. But the Cotality data suggests that scheme participants who entered early have, so far, seen strong gains in the value of their properties.
Making it work for you
The First Home Guarantee has limited places each financial year, so timing matters. There are income caps to meet, and your target property must fall within the relevant price cap for your state or territory. Key steps to take if you want to use the scheme:
You can understand your borrowing capacity using our free online calculator. Knowing how much you can borrow, and what repayments look like on properties within the cap, helps you set a clear target and act quickly when the right property appears.
Common questions
Q: Has the 5% deposit scheme made property more expensive for buyers who haven’t entered yet?
Cotality’s data suggests it has contributed to faster price growth in the affordable segment. Homes under the scheme’s price caps grew 6.7% in six months, compared to 3.6% for more expensive properties. Increased competition from both first home buyers and investors in the same price range has pushed values higher, which can make entry harder for buyers still saving for their deposit.
Q: Can I combine the First Home Guarantee with the First Home Owner Grant?
In most states, yes. The First Home Guarantee is a federal scheme that operates independently of the state-based First Home Owner Grant. Eligible buyers may be able to access both, depending on the state and property type. Check with your state revenue office and speak to a broker to understand what you can combine in your situation.
Q: What happens when property prices exceed the scheme’s caps?
If your target property is priced above the relevant cap, you cannot use the First Home Guarantee for that purchase. But you still have options: saving a larger deposit, exploring other low-deposit home loan products, or targeting a comparable property in a nearby suburb within the cap. A mortgage broker can help you assess alternatives and find a suitable path forward.