Australia’s housing market has entered a first-home buying frenzy, following the federal government’s decision to expand and fast-track its First Home Guarantee scheme in October.
The government’s scheme allows eligible buyers to enter the market with just a 5% deposit, with the government acting as guarantor for the remaining 15% of a traditional 20% deposit. Some buyers are even qualifying with deposits as low as 2%, eliminating the need for costly lenders mortgage insurance and helping buyers leapfrog years of saving.
New data from Loan Market Group, Australia’s largest mortgage aggregator, revealed a 39.2% surge in applications for the scheme since its expansion — the highest level of first-home buyer activity in years, The Daily Telegraph reported.
Queensland led the surge with a 55.2% jump in average weekly applications over October, followed by South Australia (+45%) and both New South Wales and Victoria (+34%).
Loan Market broker Max White (pictured upper left) said the spike began the moment the government announced in August that the amendments would be brought forward.
“As soon as news came out that the changes to the scheme would be introduced in October rather than next year, first-home buyers reached out to get pre-approved with lenders who participate in the scheme,” White said.
The amendments included raising property price caps — such as in Sydney, where $1.5 million became the new cut-off — and removing salary limits, allowing more households to qualify.
“The take-up shows how much first-home buyers were needing more support to break into competitive property markets,” White said.
REA Group economist Eleanor Creagh (pictured upper right) said the trend has been amplified by strong demand across all buyer segments.
“Higher first-home buyer spending coincided with a rise in demand from every other buyer segment – all at a time when listing levels and the construction pipeline remained constrained,” Creagh said.
Agents are also reporting a resurgence of buyer FOMO.
“Everyone is terrified of how much the scheme will increase prices around them and they want to get in before it happens,” said Angus Gorrie (pictured lower left), Ray White Eastern Beaches agent.
Despite its popularity, several economists have warned the scheme could carry unintended consequences.
AMP Chief Economist Shane Oliver (pictured lower right) described the program as “ridiculous,” arguing it inflates prices and burdens new buyers with excessive debt.
“If you get in first … then fantastic, you get an advantage,” Oliver said. “But (for) everybody else down the queue, the price just goes up by the same amount (as the price cap increase). It’s ridiculous.”
He noted that participants are often taking out 95% LVR loans, leaving them vulnerable to market downturns.
Similarly, Our Top 10 advisory head Simon Ma said many buyers misunderstand the scheme’s mechanics.
“Some first-home buyers believe the government is contributing the additional 15% deposit, leaving them with an 80% LVR loan. That’s not how it works,” Ma told The Daily Telegraph.
“Buyers are taking on a 95% LVR loan … the government guarantee simply removes the need for lenders mortgage insurance, it doesn’t reduce the loan size.”
Property expert Darragh Heard of Tallpopie warned that the scheme echoes past risky lending practices.
“Buyers beware,” Heard said. “There’s an air of the 2007 US market crash about this scheme. Access now may mean entrapment long-term. Higher mortgage repayments, greater interest, and what if property value falls. This needs to be regulated to the hilt.”
For mortgage brokers, the surge represents both opportunity and responsibility.
With first-home buyer demand soaring and pre-approvals hitting record highs — up more than 500% in some suburbs — brokers are likely to see stronger enquiry volumes and greater demand for guidance through complex lending requirements.
However, as borrowing levels rise and price pressures build, brokers will need to carefully assess serviceability, manage risk exposure, and educate clients on the long-term implications of high-LVR loans under the government guarantee.
Helping clients balance enthusiasm with financial caution will be key as Australia’s first-home buyer boom unfolds.
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