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{{propApi.successMessage}} {{region}} Change locationUp to four years taken off the time to save for a home
Up to four years taken off the time to save for a home
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“The expansion of the Home Guarantee Scheme announced by the Minister for Housing, Clare O’Neil MP, to take effect from 1 October 2025, will reduce the time to save a deposit by up to four years,” stated HIA Senior Economist Tom Devitt.
Friday, 05th September 2025
HIA’s Affordability Index report was released today. The Index is calculated for each of the eight capital cities and regional areas on a quarterly basis and considers the latest dwelling prices, mortgage interest rates, and wage developments.
“The effects of the first two cuts to the cash rate on housing affordability have more than offset the impact of the rise in dwelling prices leading to an improvement in housing affordability,” said Mr Devitt.
“The HIA Affordability Index improved by 3.9 per cent nationwide in the June quarter 2025 to 58.7. This indicates that 1.7 average incomes were required to comfortably service a mortgage, the lowest number of incomes in two years.
“The Australian Government recently announced an expansion of the Home Guarantee Scheme (HGS), which will allow all first home buyers (FHBs) to purchase a home without having to pay Lenders Mortgage Insurance (LMI).
“First home buyers pay between $25,000 and $30,000 in LMI to purchase an average home. Because this cost is paid up-front, it is effectively added to the loan and is repaid over 25 years, inflating the real cost of LMI.
“Removing LMI reduces the timeframe to save the deposit for a FHB by up to four years.
“The real costs of LMI to the economy are significantly higher than the upfront cost to the FHB.
“Governments place onerous barriers on FHBs.
“This policy announcement will also have downward pressure on home prices over time because it adds to the supply of homes, without adding to demand.
“Over the medium to long term, demand for housing is only derived from a change in population or the number of people per home. As this policy doesn’t change either of these variables, it has no impact on demand.
“Affordability is improving as interest rates fall faster than home prices are rising. Further structural reforms that reduce the cost of building new homes will make this cyclical improvement as large and persistent as possible,” concluded Mr Devitt
The HIA Affordability Index improved in the June Quarter 2025 in all capital cities, the largest improvement being seen in Sydney, increasing by 5.0 per cent. This was followed by Canberra (+4.9 per cent), Adelaide (+4.6 per cent), Melbourne (+4.1 per cent), Hobart (4.0 per cent), Brisbane (+2.8 per cent), Perth (+2.6 per cent) and Darwin (+0.7 per cent)
The Index also improved across the regional areas of all jurisdictions, led by Tasmania (+5.5 per cent), followed by New South Wales (+5.0 per cent), the Northern Territory (+4.5 per cent), Victoria (+3.8 per cent), Queensland (+2.5 per cent), South Australia (+2.1 per cent), and Western Australia (+1.6 per cent).
“The effects of the first two cuts to the cash rate on housing affordability have more than offset the impact of the rise in dwelling prices leading to an improvement in housing affordability,” said Mr Devitt.
“The HIA Affordability Index improved by 3.9 per cent nationwide in the June quarter 2025 to 58.7. This indicates that 1.7 average incomes were required to comfortably service a mortgage, the lowest number of incomes in two years.
“The Australian Government recently announced an expansion of the Home Guarantee Scheme (HGS), which will allow all first home buyers (FHBs) to purchase a home without having to pay Lenders Mortgage Insurance (LMI).
“First home buyers pay between $25,000 and $30,000 in LMI to purchase an average home. Because this cost is paid up-front, it is effectively added to the loan and is repaid over 25 years, inflating the real cost of LMI.
“Removing LMI reduces the timeframe to save the deposit for a FHB by up to four years.
“The real costs of LMI to the economy are significantly higher than the upfront cost to the FHB.
“Governments place onerous barriers on FHBs.
“This policy announcement will also have downward pressure on home prices over time because it adds to the supply of homes, without adding to demand.
“Over the medium to long term, demand for housing is only derived from a change in population or the number of people per home. As this policy doesn’t change either of these variables, it has no impact on demand.
“Affordability is improving as interest rates fall faster than home prices are rising. Further structural reforms that reduce the cost of building new homes will make this cyclical improvement as large and persistent as possible,” concluded Mr Devitt
The HIA Affordability Index improved in the June Quarter 2025 in all capital cities, the largest improvement being seen in Sydney, increasing by 5.0 per cent. This was followed by Canberra (+4.9 per cent), Adelaide (+4.6 per cent), Melbourne (+4.1 per cent), Hobart (4.0 per cent), Brisbane (+2.8 per cent), Perth (+2.6 per cent) and Darwin (+0.7 per cent)
The Index also improved across the regional areas of all jurisdictions, led by Tasmania (+5.5 per cent), followed by New South Wales (+5.0 per cent), the Northern Territory (+4.5 per cent), Victoria (+3.8 per cent), Queensland (+2.5 per cent), South Australia (+2.1 per cent), and Western Australia (+1.6 per cent).
Download our HIA Affordability Report
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