Federal deposit guarantee data released this week shows couples earning up to $675,000 per year are now receiving government-backed mortgage assistance under the expanded first home buyer scheme. The figure has reignited debate over whether removing income caps last year was a genuine affordability measure or a demand stimulus that pushes prices higher without expanding access.
The scheme lets buyers enter the market with a 5 per cent deposit, avoiding lender’s mortgage insurance. Until late 2024, singles earning above $125,000 and couples above $200,000 combined were locked out. That ceiling is now gone.
The mechanics of uncapped eligibility
Removing the income test means any first-time buyer, regardless of earnings, can access the guarantee, provided they meet the deposit threshold and haven’t previously owned property. In practice, that opens the door to high-income professional couples in expensive markets who have the cashflow to service large loans but lack the deposit buffer to avoid LMI.
Treasury’s position is that even high earners face barriers in markets where median house prices sit well above $1 million. The argument: a couple earning $675,000 might still need years to save a 20 per cent deposit on a $1.5 million property, and the scheme shortens that timeline.
The counter-argument from economists and opposition voices is that buyers in that income bracket don’t face affordability constraints in any meaningful sense, they face a timing preference. Subsidising their entry doesn’t expand homeownership; it shifts who gets priority access to limited stock.
Price pressure at the entry tier
Data from the past 18 months shows persistently tight conditions at the lower end of the market, suburbs and unit stock where first-time buyers typically compete. Listings remain scarce, auction clearance rates for sub-$800k properties in metro markets have stayed elevated, and time-on-market has compressed.
Uncapped schemes add buyers to that cohort without adding supply. When a high-income couple uses the guarantee to bid on the same stock a median-income household is chasing, the effect is predictable: the price ceiling lifts, and the household with less firepower either stretches further into debt or drops out.
This isn’t speculation. Independent analysis flagged the risk before the caps were lifted, deposit guarantees in other jurisdictions (UK Help to Buy, New Zealand’s first-home grants) have been repeatedly linked to price inflation when eligibility broadens faster than supply grows.
How other markets target assistance
Several comparable economies use means-tested deposit schemes with hard income and price caps. The UK’s current Help to Buy equity loan (now closed to new applicants) capped household income at £90,000 and restricted eligible properties to new builds under regional price limits. New Zealand’s First Home Grant requires income below NZ$95,000 (single) or NZ$150,000 (couple) and caps purchase prices by region.
Both models aim to direct assistance toward households genuinely locked out by deposit hurdles, not those who can save but prefer faster entry. The trade-off: tighter targeting limits the number of transactions the scheme supports, which means smaller headline numbers for political messaging.
Australia’s choice to go the other direction, no income cap, no price cap, maximises scheme uptake but dilutes its impact on actual affordability. The question is whether the goal is to help marginal buyers or to stimulate transaction volumes.
Trade-offs and what genuine affordability policy looks like
The catch
Uncapped schemes create a perverse incentive: they reward high-income buyers for delaying deposit accumulation. A couple earning $675,000 could save a 20 per cent deposit in under two years with modest spending discipline, but the guarantee lets them enter now and deploy that capital elsewhere (offset account, investment property deposit, super contributions). The scheme becomes a wealth optimisation tool, not an access intervention.
Genuine affordability policy would look different. It would pair deposit assistance with supply-side reforms (zoning, state-owned land release, build-to-rent incentives), means-test eligibility to target households below median income, cap purchase prices to steer demand toward middle-ring and outer suburbs where supply is deeper, and link guarantees to new builds to expand stock rather than compete for existing dwellings.
None of that is politically simple. Means testing reduces headline participation numbers. Price caps limit where buyers can use the scheme, which plays poorly in high-cost electorates. Tying assistance to new builds adds construction risk and delays.
But without those constraints, the scheme operates as a demand lever that bids up entry-tier prices while delivering windfalls to buyers who don’t need help.
What could change the settings
Three scenarios over the next 12–18 months could shift policy:
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Base case: scheme settings stay as-is through the election cycle. Treasury defends uncapped access on the basis that expensive markets justify high-income eligibility. Price pressure at the entry tier persists, but broader rate and credit conditions matter more for headline affordability.
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Tightening scenario: political pressure forces a compromise, income caps return but at a higher threshold than the old $200k (say, $300k for couples). This narrows access without killing the scheme’s headline numbers. Likely if further data shows concentrated uptake among top-quartile earners.
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Expansion scenario: government adds regional purchase-price caps or new-build-only rules to steer demand without cutting income eligibility. Harder to implement, easier to message as “targeting supply.”
The risk to watch: if entry-tier price growth outpaces wage growth for another year, the political cost of defending $675k beneficiaries becomes untenable, regardless of Treasury’s market-by-market logic.
For a deeper look at how policy commitments on affordability lack follow-through, see this analysis of tracking gaps in affordable housing.
Bottom line for buyers and investors
If you’re a first-time buyer eligible for the scheme, it remains a useful timing tool, just recognise you’re competing in a crowded cohort, and the price you pay today reflects that demand layer. If you’re watching the market as an investor or upgrader, uncapped schemes telegraph that policy settings still favour transaction volumes over price discipline, which keeps entry-tier stock tight and yields compressed.
For median-income households hoping the scheme opens a path to ownership: the data says you’re now competing with buyers earning three times your income for the same stock. That’s not an affordability intervention; it’s a queue-jumping mechanism.
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General info, not financial advice.
