There is a table on the federal government’s first home buyer website that almost nobody around here has read, and it is worth more to a Newcastle first home buyer than any other single document I can think of.
It sets the property price caps for the Australian Government 5% Deposit Scheme — the scheme most people still call the Home Guarantee Scheme. And it splits New South Wales into two:
| Where you buy in NSW | Price cap |
|---|---|
| Capital city and listed regional centres | $1,500,000 |
| Other areas | $800,000 |
The listed regional centres in New South Wales are the Central Coast, Coffs Harbour–Grafton, the Illawarra, the Mid North Coast, Richmond–Tweed, and Newcastle and Lake Macquarie.
We are on the same cap as Sydney. Buy an hour inland and the cap is $800,000.
Why That Matters So Much Here
The median house across Newcastle and Lake Macquarie is $1,059,758. Under an $800,000 cap, the typical local house would simply be ineligible. Under the $1.5 million cap, almost the entire market qualifies.
| Local market | Median | Under the $1.5m cap? |
|---|---|---|
| Newcastle & Lake Macquarie houses | $1,059,758 | Yes |
| Newcastle & Lake Macquarie units | $808,899 | Yes |
| Warners Bay | $1,180,000 | Yes |
| Hamilton | $1,177,606 | Yes |
| Islington | $1,004,536 | Yes |
| Dora Creek | $870,503 | Yes |
| Redhead | $2,145,777 | No |
Redhead is the only local market on this list above the cap — and it is also the only house market in the region that grew over winter.
What Changed on 1 October 2025
The scheme was substantially rewritten, and the changes matter more than the rename:
- No income caps. The old test was $125,000 for singles and $200,000 for couples. Both are gone. You can earn any amount.
- No waitlists. Places were previously capped each financial year and ran out. That limit has been removed.
- No Lenders Mortgage Insurance. Unchanged, and still the single biggest saving.
- 5% deposit for first home buyers; 2% for single parents and legal guardians.
If you looked at this scheme a year or two ago and were told you earned too much, or that places had run out, that advice is now out of date.
What a 5% Deposit Actually Means Locally
| 5% deposit | 20% deposit | |
|---|---|---|
| Median house — $1,059,758 | $52,988 | $211,952 |
| Years to save at $1,500/month | 2.9 | 11.8 |
| Median unit — $808,899 | $40,445 | $161,780 |
| Years to save at $1,500/month | 2.2 | 9.0 |
Nine years of saving, removed. That is the headline, and it is real.
The Part That Is Not Free
A smaller deposit means a bigger loan. On the median house, borrowing 95% instead of 80% costs about $957 a month more at 6.04 per cent over 30 years.
So the trade is nine years of saving against roughly a thousand dollars a month. Whether that is worth it depends on your income, your rent now, and what you think local prices will do. It is not automatically the right answer — but it is a genuine choice, and a year ago many local buyers were not offered it.
There is also a timing consideration. Markets are pricing a strong chance of a cash rate rise, and a higher rate reduces what you can borrow. We covered what that does to borrowing capacity in four months of falling values and what two more rate rises mean.
Both the Price and the Valuation Must Fit
One detail that catches people: the government requires that both the purchase price and the lender’s assessed value sit at or below the cap. If you buy at $1.48 million and the valuation comes in at $1.52 million, you have a problem. In a market where values have been falling for four months, valuations coming in low is the more common issue — but it cuts both ways.
If you are building, the land price plus construction cost must come in under the cap combined.
Frequently Asked Questions
What is the 5% Deposit Scheme price cap in Newcastle?
$1,500,000. Newcastle and Lake Macquarie are listed regional centres, so they share the same cap as Sydney. Most other parts of regional New South Wales have an $800,000 cap. Other NSW listed regional centres include the Central Coast, the Illawarra, Coffs Harbour-Grafton, the Mid North Coast and Richmond-Tweed. At $1.5 million, almost the entire Newcastle and Lake Macquarie market qualifies.
Is there an income limit for the 5% Deposit Scheme?
Not any more. Since 1 October 2025 there are no income caps, so the old limits of $125,000 for singles and $200,000 for couples no longer apply. Places are no longer rationed each financial year either, so there are no waitlists. The scheme still requires only a 5 per cent deposit (2 per cent for single parents and legal guardians) and charges no Lenders Mortgage Insurance.
What happens if the bank valuation is above the 5% Deposit Scheme price cap?
Both the purchase price and the lender’s assessed value must sit at or below the cap. If you buy at $1.48 million and the valuation comes in at $1.52 million, the property may not qualify. When values are falling, low valuations are the more common problem, but it cuts both ways. If you are building, the land price and construction cost combined must come in under the cap.
Is it better to buy with a 5% deposit or save 20%?
It is a trade-off. On the Newcastle and Lake Macquarie median house of $1,059,758, a 5 per cent deposit is $52,988 against $211,952 for 20 per cent: about 2.9 years of saving at $1,500 a month versus 11.8. But borrowing 95 per cent instead of 80 per cent costs about $957 a month more at 6.04 per cent over 30 years. Which suits you depends on your income, rent and outlook.
What About a Guarantor?
If you have the 5% but not much more, the scheme may be all you need — and it does not put a family member’s home at risk. That is worth establishing before anyone asks their parents for anything.
If you do not have 5%, or you do not qualify, a family guarantee is the other route. We set it out in full in our guide to guarantor home loans, and the guarantor calculator will tell you which of the two you are closer to.
Either way, the first step is finding out what you can borrow. The borrowing power calculator is the place to start, and our first home buyers page covers the NSW grants and duty concessions that stack on top.
Want to talk through what this means for your situation? Call David on 0417 676 191 or get in touch via our contact form.
This article is general information only and does not take into account your objectives, financial situation or needs. Figures are illustrative and current as at the date of publication. Interest rates, lender policies and government scheme rules change — please seek advice specific to your circumstances before acting.
Sources
- Australian Government, 5% Deposit Scheme — Property Price Caps, including the listed regional centres.
- Australian Government, 5% Deposit Scheme — the 1 October 2025 changes removing income caps and waitlists.
- Median values: Cotality Home Value Index for the three months to the end of August 2026, as reported by the Newcastle Herald.
- Repayment figures are calculated on a 30-year principal and interest loan at the rate stated.
Ready to move forward?
Have questions about anything in this article? David from Rebus Finance can help with a free, no-obligation chat.