Has the First Home Guarantee Scheme Changed Now That Interest Rates Are Rising in 2026?
The First Home Guarantee still lets eligible buyers purchase with 5% down and no LMI — but the rate environment means your borrowing capacity and repayment buffer deserve more attention than they did 12 months ago.
The scheme itself hasn’t changed — but the environment around it has. Rising rates in 2026 have shifted the calculation for many first home buyers weighing whether to enter the market now or wait until rates stabilise. Property prices may rise or fall depending on market conditions.
What the Scheme Still Offers
The core structure is unchanged: eligible buyers can purchase with a 5% deposit, the government guarantees the remaining 15% to the lender, and no Lenders Mortgage Insurance applies. As at late 2025, income caps and annual place limits were removed, though scheme settings can change over time.
What Rising Rates Change
Most lenders apply a 3% serviceability buffer on top of the current rate when assessing your loan. As rates rise, that buffer tests your ability to service a loan at an increasingly elevated rate. This doesn’t disqualify most buyers — but it does reduce the loan amount you’ll be approved for.
The Real Question for 2026
With rates moving, entering at 5% means your repayments are higher than they would have been at 2022 rates. The honest trade-off is whether you buy now and start building equity, or wait while continuing to save, noting that both interest rates and property prices can change over time. Neither answer is universally right — it depends on your market, your income, and your financial position.
Property Price Caps
Property price caps still apply (based on information available at the time of writing):
- Sydney: $1,500,000
- Melbourne: $950,000
- Brisbane: $1,000,000
- Other capitals and regional areas: confirm with Housing Australia for current limits
The scheme is still one of the most practical entry points into the market available to first home buyers in 2026. Whether it’s the right move depends on your numbers, not just the existence of the scheme.
You may wish to speak with a licensed mortgage broker to assess your personal circumstances.
This is general information only. Scheme eligibility, property price caps, and serviceability assessments are subject to change. Speak with a licensed mortgage broker for advice tailored to your circumstances. All loans are subject to lender approval.
Sources: Housing Australia, First Home Guarantee Scheme 2025–26; RBA, Monetary Policy Statement 2026; APRA Serviceability Buffer Guidance 2023.
