From 1 October 2025, first home buyers can purchase with a 5% deposit and pay no Lenders Mortgage Insurance because the Australian Government provides a guarantee to participating lenders. This guide explains the policy changes that took effect on the start date, how the 5% setting operates in practice, which property types are covered, and how price caps work by state and region.
We’ll also show you how to confirm the correct cap for your suburb and what to discuss with a lender so you can move from interest to approval with confidence. Empower Money is a reputable no deposit home loan lender and we can help you apply the rules correctly.
Changes from 1 October 2025
Removal of Place Limits
Scheme places are now unlimited, which removes a major bottleneck that previously forced buyers to wait for releases or to miss out entirely. Unlimited places do not create automatic approvals. Lenders still apply standard credit checks and property criteria. The practical impact is better planning. You can line up finance with more certainty that a place is available when you find a suitable property.
No Income Caps
Income caps for first home buyers under the 5% setting have been removed. This simplifies eligibility and reduces edge cases where a small pay rise disqualified an applicant. The absence of income caps does not bypass responsible lending settings. Lenders must still test serviceability and prove you can afford the repayments at an assessment rate above the product rate.
Updated Property Price Caps
Property price caps increased across the country. Capital cities and named regional centres have higher limits than other areas in each state. Territories have single caps. Caps are policy settings that can change, so you should confirm the number that applies to your contract date. If your target price sits close to a cap, allow a buffer in case a valuation or contract adjustment nudges the figure above the limit.
How the 5% Deposit Setting Works for First Home Buyers
Government Guarantee and No LMI
The government guarantee covers the lender’s risk on the portion of the loan that sits above 80% of the property value and up to a set cap, so the lender can offer a 95% Loan to Value Ratio without charging LMI. The guarantee is not cash to you and it does not remove your responsibility to repay the full loan. If repayments are missed the lender will follow normal collections processes. The guarantee operates in the background to support the approval and pricing structure.
Deposit Size and Loan to Value Ratio
A 5% deposit is the minimum under the setting, plus standard purchase costs that are not part of the deposit. The LVR at settlement is typically 95% when you contribute 5%. A larger deposit can reduce repayments and may improve the rate or product options available to you. Lenders will ask for evidence of savings and the source of funds, so prepare clear documents to avoid delays.
Participating Lenders and Application Flow
Applications are made through participating lenders that have signed up to the policy settings. Empower Money can help you assess product options, confirm that the property type is eligible, and check that the purchase price sits under the correct cap. Lenders assess income, expenses, credit history, and the property valuation before issuing formal approval.
Typical flow
- Confirm that the property type is eligible and that the estimated price is at or below the local cap.
- Apply with a participating lender on the 5% deposit setting and provide full supporting documents for serviceability and identity.
- Proceed to settlement. The lender claims the guarantee in the background while you make repayments under the loan contract.
Eligible Property Types under the 5% Deposit Setting
The setting covers a wide range of property categories so that buyers can choose a home that matches their budget and location goals. The general rule is that the title and use must be residential and the purchase price must sit at or below the relevant cap for the area.
- Existing houses, townhouses, and units.
- New builds including off the plan.
- House and land packages.
- Vacant land with a separate building contract, where the combined land price and build cost are at or below the cap.
For off the plan purchases, the lender may require additional conditions around completion dates and valuation at settlement. For land and build, the lender will count the total of the land contract and the fixed price building contract when testing against the cap. Owner occupancy requirements still apply, so plan to move in within the required timeframe unless an exception is clearly stated.
Price Caps by State and Region
The table shows the maximum eligible purchase prices under the 5% deposit setting. Capital cities and the named regional centres have higher caps than other areas in the same state. Always confirm a specific suburb or postcode with the official price cap tool before you sign a contract because suburb boundaries and regional centre definitions matter.
*Regional centres are Illawarra, Newcastle and Lake Macquarie in NSW, Geelong in VIC, and Gold Coast and Sunshine Coast in QLD.
How to Confirm a Suburb’s Cap with the Postcode Tool
The postcode tool is the source of truth for price caps. It maps suburbs and postcodes to the correct category and shows the current cap. This avoids guesswork and helps you avoid contracts that exceed the limit by a small amount. For border suburbs, the tool clarifies whether you fall inside a capital city or named regional centre area.
- Open the official 5% Deposit Scheme page and select the postcode price cap tool.
- Enter the suburb or postcode and choose the correct state or territory, then view the cap result.
- Save a copy of the result and confirm it with your participating lender before you sign a contract so the finance clause is aligned with the cap.
Key Points to Discuss with a Participating Lender
A focused discussion with your lender will save time and reduce uncertainty. Frame the call around purchase price, deposit size, and how repayments look without LMI so everyone is working from the same facts.
- The maximum purchase price for your short list of suburbs and how this interacts with your deposit and other costs.
- The minimum deposit required at your price point, whether any grants apply, and how costs are treated at settlement.
- The estimated monthly repayment at your preferred rate and term, and how the absence of LMI affects your upfront outlay and cash flow.
FAQs
Is the 5% deposit setting available to all first home buyers from 1 October 2025?
Yes. From 1 October 2025 the 5% deposit setting applies nationally for eligible first home buyers across participating lenders. Places are uncapped, which means timing is driven by your property search and your lender’s approval process rather than booking a place. Lender credit criteria and scheme rules still apply.
Do I still pay Lenders Mortgage Insurance under the 5% deposit setting
No. The government guarantee replaces the need for LMI on qualifying loans. The guarantee sits between the lender and the government. You do not pay a premium for it and you remain responsible for all repayments. If you miss repayments the lender will manage the account in the usual way and scheme rules will continue to apply.
What are the property price caps and how do regional centres work?
Price caps vary by state and location. Capital cities and named regional centres have higher caps, while other areas have lower caps. The named regional centres are Illawarra, Newcastle and Lake Macquarie in NSW, Geelong in VIC, and Gold Coast and Sunshine Coast in QLD. If you search in multiple suburbs, check each one because a boundary can shift the applicable cap.
Can I use the 5% deposit setting for off the plan or house and land?
Yes. Off the plan, house and land, and vacant land with a building contract are eligible under the setting if the combined price is at or below the cap. Lenders will review completion dates, valuation at settlement, and the total of the land contract and the fixed price build contract to ensure the purchase meets the rules.
How do I confirm the correct cap for my suburb?
Use the official postcode tool to look up your suburb or postcode. Keep a copy of the result and share it with your lender. For border suburbs, ask the lender to verify the mapping so the finance clause and your approval reflect the correct price limit.
Sources
- Housing Australia - Unlimited Places and Higher Caps from 1 October 2025
- Housing Australia - Expanded Australian Government 5% Deposit Scheme
- Prime Minister of Australia - Uncapped 5% Deposits Available for First Home Buyers Today
- Prime Minister of Australia - 5% Deposits for All First Home Buyers Sooner
- First Home Buyers - Australian Government 5% Deposit Scheme Overview
- NAB - Australian Government 5% Deposit Scheme Property Price Caps Effective 1 October 2025
- Commonwealth Bank - 5% Deposit Scheme Information Guide
