5% Deposit Scheme (First Home Guarantee) 2026: No Caps

$160,000. That's a 20% deposit on an $800,000 home, and at $2,500 a month it takes more than five years to save. Since 1 October 2025, the Commonwealth will back the same purchase with $40,000.

The Australian Government 5% Deposit Scheme (formerly the First Home Guarantee) is open to every eligible first home buyer in Australia in 2026: no income caps, no annual place limits, and price caps high enough to cover Sydney's median. If a deposit was the wall between you and buying, the wall just got shorter. For the broader playbook, start with our first home buyer guide for 2026.

Timing matters as much as the scheme does. The RBA lifted the cash rate three times in February, March and May 2026 before holding at 4.35% in June, and Cotality's June 2026 data shows auction clearance rates in the low 40s with Sydney values down 3.2% over the quarter. Rising rates thin the crowd. Fewer bidders on auction day, more room to negotiate, and a preparation window before the next RBA decision on Tuesday 11 August 2026.

What changed on 1 October 2025?

Three things, and each one removed a reason buyers used to miss out.

Income caps: gone. The old income test excluded higher-earning couples entirely. Now there is no income test at all, so a couple on $350,000 can use the scheme on the same terms as a couple on $110,000.

Place limits: gone. The annual allocation, and the race to reserve a spot before it ran out, no longer exists. Apply when you are ready, not when the quota resets.

Price caps: raised. The caps now sit above or near the median in most capitals. Sydney's median dwelling value of $1.266 million (Cotality, June 2026) fits inside the NSW cap with room to spare.

Caps for other states, territories and some regional areas differ, so check Housing Australia's eligibility tool for your exact postcode. The separate Regional First Home Buyer Guarantee has been absorbed into the main scheme, which means regional buyers use the same front door as everyone else.

Follow the chain through. Unlimited places sounds relaxing, but it moves the bottleneck. The constraint on your purchase is no longer scheme scarcity; it is your borrowing power under serviceability tests that stack APRA's 3% buffer on top of 2026's higher rates. The buyers who win are not the ones who apply first. They are the ones who know their real number before they book a single inspection.

How does buying with a 5% deposit actually work?

The scheme is a guarantee, not a grant. No cash lands in your account. Housing Australia guarantees up to 15% of the property's value to your lender, so the lender treats your 5% deposit the way it would treat 20%.

The practical payoff is Lenders Mortgage Insurance, or rather the absence of it. LMI is a premium that protects the lender when your deposit is under 20%, and at 95% borrowing on a $900,000 home it typically runs past $30,000, added to your loan so you pay interest on it for decades. Under the guarantee, that premium is never charged.

You still borrow the other 95% and repay it. A bigger loan means bigger repayments, and your lender will test them at your actual rate plus APRA's 3% buffer before saying yes.

"Keep saving until it feels safe" is the advice most first home buyers still get. The goalposts moved anyway. Brisbane's median climbed 17.4% in the year to June 2026 and Perth's climbed 23.9%, which means the target home outran the savings account in both cities. The real risk was the delay, not the small deposit.

One thing we've seen repeatedly: buyers reserve a scheme place, pick the home, then discover their borrowing capacity is $70,000 short because one lender's calculator treats a car lease or HECS balance more harshly than another's. The scheme guarantees your deposit gap. It does not guarantee your approval.

Who qualifies now, and who still misses out?

Eligibility is broad. You qualify if you are an Australian citizen or eligible permanent resident, at least 18, and buying or building a home you will live in. First home buyers are the core audience. In most cases, people who have not owned an Australian property in the past ten years can also apply. Single parents and eligible legal guardians retain a 2% deposit pathway within the scheme; our single-parent 2% pathway guide covers how that side of the scheme currently works.

Who misses out? Investors, because the scheme is owner-occupier only. And buyers whose target property sits above the price cap, which bites hardest in Sydney's Inner West and lower North Shore, where quality houses clear $1.5 million.

Above the cap, you are not back to a 20% deposit. Under specialist lending policies available through Wity, any borrower can go to 85% with no LMI, nurses, midwives, allied health and senior professionals to 90%, and doctors and dentists to 95%. Unsure what deposit your situation actually requires? Our guide to how much deposit you need runs the numbers tier by tier.

What does the scheme save you in real dollars?

Same couple. Two paths.

Holly and Marcus, both 29, rent in Kedron in Brisbane's inner north and want a $900,000 townhouse nearby. They have $45,000 saved and can put away $3,000 a month.

Path A, save a full 20%. They need $180,000, so $135,000 more at $3,000 a month: 45 months, nearly four years of rent. If Brisbane grows at even a third of its recent 17.4% annual pace over that stretch, the same townhouse costs well over $1 million before they are ready. The target moves faster than the savings.

Path B, use the 5% Deposit Scheme now. Their $45,000 is 5% of $900,000, comfortably under Queensland's $1 million cap. They borrow $855,000, and the LMI that would typically cost around $30,000 at this loan size is never charged. They own in 2026, not 2030.

The gap: roughly four years of Brisbane growth working for them instead of against them, plus about $30,000 in LMI they never pay and never pay interest on.

Based on typical scenarios. Individual outcomes vary.

One honest caveat. A 95% loan carries higher repayments than an 80% loan, and a thinner equity buffer if prices dip the way Sydney's did this quarter. Stress-test the repayments against your budget, not against your optimism.

Scheme, Help to Buy or FHSS: which lever do you pull?

The 5% Deposit Scheme is no longer the only Commonwealth lever, so it pays to know the field.

Help to Buy launched on 5 December 2025 and its lender panel is still small, though it is expanding through 2026; our Help to Buy guide covers the shared-equity trade-off. FHSS stacks with the 5% Deposit Scheme, so many buyers use both. For the full head-to-head, read FHG vs FHSS vs Help to Buy.

Which lever suits you comes down to borrowing capacity, and capacity is not one number. The Wity Borrowing Power Assessment models yours across 45+ lenders rather than one bank's calculator, and because participating lenders assess debts, HECS and living expenses differently, the spread between the lowest and highest figure on identical payslips can run six figures. Knowing that spread before you choose a scheme is the whole game.

What should you do before the market turns?

The banks disagree about where rates go next. You do not need to pick the winner. Either way, when cuts eventually arrive the crowd comes back, and clearance rates in the low 40s will not survive the return.

Three moves this month. Check the price cap for your target suburb against Housing Australia's tool. Get your borrowing power modelled across lenders, not guessed from one app. Start assembling payslips, statements and ID so pre-approval is a week's work, not a month's.

Want to see what a 5% deposit gets you? Start the Wity questionnaire → Free, no credit check, two minutes.