Australia’s plan to expand its Home Guarantee Scheme (HGS) from October has drawn sharp criticism from insurers and opposition figures, who warn it could inflate property prices and leave lower-income first home buyers worse off—despite government claims it will ease deposit pressures.
Under the expanded scheme, first home buyers with a 5% deposit will be exempt from mandatory Lenders’ Mortgage Insurance (LMI), a move the federal government says will save users around $1.5 billion in LMI premiums in the first year alone. Prime Minister Anthony Albanese emphasized Labor was fulfilling its election mandate: “We were re-elected with a clear commitment to bring down the deposit hurdle for first home buyers, and we’re delivering on that.” The government estimates the scheme could cut up to six years off deposit-saving time and save buyers roughly $25,000 in mortgage insurance, with Australia’s median home price currently at $844,000.
But the Insurance Council of Australia (ICA) has slammed the policy as counterproductive. CEO Andrew Hall acknowledged the scheme’s good intentions but warned its expansion risked “price increases greater than what people would have paid in LMI.” Using a $700,000 home as an example, ICA analysis shows buyers would save $21,000-$28,000 in LMI but face a $37,100-$69,300 jump in the home’s price—leaving them $16,100 to $41,300 worse off in the early years.
Research from consultancy Lateral Economics, cited by ICA, fuels these concerns: it estimates the expansion could push national property prices up by 3.5%-6.6%, bring forward demand from 20,600-39,100 first-time buyers, and price out up to 6,500 lower-income buyers in the first year. The steepest price rises are expected for homes up to the scheme’s new price caps, which will hit $1.5 million in some cities—impacts ICA says “far outstrip any savings from forgoing LMI.”
ICA is calling for stricter safeguards, including asset testing for recipients, transparent risk reporting, and independent assessments. Without these, Hall argued, the scheme will mostly benefit those who “would still buy without it”—such as buyers with parental support or higher deposits—rather than its intended target. This misalignment, ICA says, means the home ownership rate will rise only marginally, from 66% today to 67.2% over five years.
The opposition has also weighed in. Liberal housing spokesman Andrew Bragg labeled the expanded scheme “radical,” warning it exposes taxpayers to “an enormous contingent liability, likely to be tens of billions.” He accused the government of incoherence: “It says it wants to cut red tape, but then it wants to become a universal property insurer.” Bragg went further, claiming the changes amount to “the nationalisation of lenders’ mortgage insurance for first home buyers” that could “wipe out the private LMI industry”—and even allow “the children of billionaires to spend taxpayer dollars to buy their first home.”
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