The RBA held the cash rate at 4.35 percent in May 2024, and forward-market pricing suggests at least one more cut won’t materialise until early 2025. For first-home buyers attempting to break into the property market, that delay matters. It keeps the major banks’ serviceability floor rates above 8 percent and, for anyone relying on the federal government’s First Home Guarantee, it sharpens the role of the scheme’s two binding numbers: the income cap and the property price limit. On 1 July 2023, Housing Australia lifted the FHBG price caps across every state and territory. In greater Sydney they jumped from $800,000 to $900,000, a 12.5 percent increase, while dozens of regional postcodes saw even larger proportional adjustments. Yet the income caps haven’t moved; they remain at $125,000 for singles and $200,000 for couples. With a 3‑percentage‑point serviceability buffer still in force at CBA, Westpac, NAB and ANZ, the income cap is now the tightest constraint for many prospective borrowers. This article unpacks both sets of limits, how they interact with current lender credit settings, and what a would‑be buyer should verify before lodging a 2024 application.
How the First Home Guarantee Works Today
The First Home Guarantee (FHBG) is the largest‑volume stream of the Home Guarantee Scheme administered by Housing Australia. The federal government allocates 35,000 places each financial year, making a 5 percent deposit – without lenders mortgage insurance – possible for eligible owner‑occupier first‑home buyers. The government guarantees up to 15 percent of the property’s value, removing the LMI cost that usually attaches to a 95 percent LVR loan.
Participating Lenders and the Application Timeline
Twenty‑seven lenders participate, including the big four banks, a range of regional banks and a handful of non‑bank lenders such as Bendigo Bank and Regional Australia Bank. Places are released quarterly, and a buyer must secure an allocated place at or before formal loan approval. A pre‑approval does not reserve a place, so timing the application to coincide with a quarterly release can be critical. Lenders report that the 35,000 places were exhausted before the end of the last two financial years; in 2023‑24, the remaining pool as of late May 2024 is thin.
What the Guarantee Does Not Change
The FHBG does not relax lender credit policy. Every participating lender still applies its full suite of borrowing‑capacity calculations, including the APRA‑informed serviceability buffer of at least 3 percentage points above the product rate. The borrower must satisfy the lender’s genuine‑savings requirements, income verification and standard security‑assessment criteria. A government guarantee simply substitutes for LMI; it does not override a lender’s internal debt‑to‑income cap or living‑expense benchmark.
Income Caps – The Hard Ceiling
The FHBG caps taxable income at $125,000 for a single applicant and $200,000 for couples, defined as two people who are legally married or in a de facto relationship. The income test uses the taxable income shown on the Notice of Assessment (NOA) issued by the ATO for the most recent financial year. For an application lodged in June 2024, the relevant return is the 2022‑23 NOA.
How Housing Australia Verifies Income
Housing Australia requires an applicant to submit the full NOA, not a summary. The figure assessed is “taxable income” after deductions – including negative gearing losses or work‑related deductions – and does not include employer superannuation contributions. Salary sacrifice amounts are included if they appear as reportable fringe benefits or reportable employer super contributions on the tax return; otherwise they are excluded. If an applicant is self‑employed, the same concept applies: the NOA taxable income line. A couple whose combined taxable income is $199,999 qualifies; one dollar above $200,000 triggers disqualification, with no taper.
Why the Income Cap Now Bites Harder Than the Price Cap
The serviceability buffer transforms the income cap into the de facto price limit for all but the most well‑resourced applicants. NAB’s home loan serviceability framework, as published on its website and accessed on 30 May 2024, states that the assessment rate is the higher of the product rate plus 3.00 percent or an 8.00 percent floor. For an owner‑occupier P&I loan at the bank’s standard variable rate of 6.49 percent, that yields an assessment rate of 9.49 percent. At that rate, a single borrower with no other debts and a $125,000 gross income – and assuming NAB’s post‑tax living expense benchmark of roughly $18,000 a year – can borrow approximately $525,000. Adding a 5 percent deposit of $27,600 gives an entry price of $552,600 — well below every capital‑city property price cap. For a couple earning $200,000 combined, the same calculation lifts borrowing capacity to around $900,000, enabling a purchase price of approximately $947,000 with a 5 percent deposit. That puts the Sydney $900,000 cap within reach, but only barely, and leaves little headroom for body corporate fees or other debt. In the ACT, the $750,000 cap is easily serviceable for a $200,000‑income couple, whereas a single earning $125,000 can only stretch to a purchase of about $580,000.
Property Price Limits – The 1 July 2023 Overhaul
On 1 July 2023, Housing Australia released a full set of updated property price caps for the First Home Guarantee. The new caps replaced those that had applied since 1 July 2022, and they remain in effect for the 2023‑24 financial year. The caps are postcode‑based, splitting each state and territory into two tiers: a higher cap for capital cities and designated regional centres, and a lower cap for the rest of the state.
2023–24 First Home Guarantee Price Caps
| State / Territory | Capital City & Regional Centres | Rest of State |
|---|---|---|
| NSW | $900,000 | $750,000 |
| VIC | $800,000 | $650,000 |
| QLD | $700,000 | $550,000 |
| WA | $600,000 | $450,000 |
| SA | $600,000 | $450,000 |
| TAS | $600,000 (Hobart) | $450,000 |
| ACT | $750,000 (whole territory) | – |
| NT | $600,000 (whole territory) | – |
Source: Housing Australia, “First Home Guarantee property price caps – 2023‑24,” published 1 July 2023.
Regional centres that qualify for the higher tier include Newcastle, Wollongong, Geelong, the Gold Coast, the Sunshine Coast, and similar areas. A full postcode lookup is available on the Housing Australia website.
How the Caps Interact with Deposit and Serviceability
A 95 percent LVR loan against a $900,000 property requires a deposit of $45,000 and a loan of $855,000. As shown earlier, a couple on $200,000 can pass serviceability for that amount, but a single simply cannot. The cap, therefore, acts primarily as a guardrail against the guarantee being used for premium property purchases. For first-home buyers outside the major capitals, the caps are rarely binding. A $450,000 home in regional SA or WA, for instance, demands a $22,500 deposit and a loan of $427,500 — well inside the borrowing capacity of a single earning $125,000. The real risk for regional buyers is that they inadvertently exceed the cap if they are looking at a property in a high‑tier postcode without realising the limit has jumped.
Lender Policies and Overlays That Tighten Eligibility
While the government sets the headline parameters, each lender adds its own credit filters. Even if an applicant meets the income cap and property price limit, the lender can decline the loan for other reasons that affect many first-home buyers.
Genuine Savings and the 5 Percent Deposit
Most participating lenders insist that the 5 percent deposit comes from genuine savings held by the applicants for at least three months. Gifts from parents are often acceptable if accompanied by a statutory declaration that the funds are non‑repayable, but lenders such as ANZ require at least 3 percent of the purchase price to be from the buyer’s own resources. First‑Home Owner Grants (FHOGs) can contribute, but the buyer must still meet the genuine‑savings hurdle. Some mid‑tier lenders like Bank Australia have waived the genuine‑savings rule for FHBG loans, yet that can come with a higher interest rate.
Debt‑to‑Income Caps Remain Active
CBA’s loan serviceability policy (effective 8 November 2023, as confirmed on its website) imposes a hard DTI cap of 7 for owner‑occupier loans with LVRs above 90 percent. At the Sydney $900,000 cap, a $855,000 loan divided by a $200,000 income gives a DTI of 4.28 — easily inside the limit. For a single earning $125,000 borrowing $525,000, DTI is 4.2. So while DTI rarely excludes an FHBG applicant, it can become a problem if the applicants carry a car loan or HECS‑HELP debt. A couple with $200,000 in gross income and a $40,000 car loan would have total liabilities of $855,000 + $40,000 = $895,000, taking their DTI to 4.48 — still below 7, but the lender’s serviceability calculation will cut maximum borrowing capacity significantly once those other repayments are fed in.
Construction Loans and the Price Cap
The FHBG can be used for a house‑and‑land package or a stand‑alone construction loan. The property price cap applies to the total value of the land plus the fixed‑price building contract. Valuers must confirm the completed value before the guarantee is issued. If the contract price moves above the cap during construction – because of upgrades or unforeseen costs – the buyer must fund the difference without the guarantee. Most lenders will not approve a construction loan under the FHBG unless the builder’s contract is fixed‑price and the valuer’s estimate of the as‑completed value stays within the cap.
Key Takeouts for Borrowers
- Verify your taxable income from the latest NOA now. If a couple’s combined income is close to $200,000, consider timing the application for after a lower‑income year or restructuring salary sacrifice to stay under the threshold.
- Use Housing Australia’s postcode tool to confirm which price cap applies to the suburb you are targeting. The uplifted 1 July 2023 caps opened new postcodes, but crossing from a capital‑city tier to a rest‑of‑state tier often lowers the cap by $150,000 or more.
- A single applicant on $125,000 should be realistic about maximum purchase price — around $550,000, well below most capital‑city caps. The Regional First Home Buyer Guarantee offers the same income caps and higher price limits in regional areas, which may suit a buyer willing to relocate.
- Start a pre‑approval with a participating lender early in the quarter, and be ready to convert to a full application as soon as the next batch of places opens. Ask the lender explicitly about genuine‑savings requirements, DTI limits and whether HELM or a specific living‑expense floor is applied.
- If construction is involved, obtain a fixed‑price contract that leaves at least a 5 percent buffer below the postcode cap. Track the valuation before unconditional approval; if the assessed as‑completed value creeps above the limit, the guarantee cannot be relied upon.