November 2025: How the HECS Cut and New Property Caps Are Rewriting the Rules for 2026

For aspiring homeowners in Sydney, November 2025 has delivered a rare alignment of policy changes that could significantly boost your purchasing power. While the Reserve Bank held the cash rate steady at 3.60% this month, two distinct government initiatives have quietly created what we’re calling the ‘double bonus’ for first home buyers.

Bonus #1: The 20% HECS Debt Reduction

As of November 2025, the Australian Taxation Office has commenced processing the Federal Government’s landmark 20% reduction in student loan debt. The Universities Accord (Cutting Student Debt by 20 Per Cent) Act became law on 2 August 2025, and the ATO is now applying these reductions to over 3 million Australians with outstanding HELP debts.

This isn’t just a reduction in what you owe—it’s a direct boost to what you can borrow. Here’s why this matters for first home buyers:

• The 20% reduction applies to your loan balance as at 1 June 2025, before indexation is calculated
• The minimum repayment threshold has increased to $67,000 (up from $54,435), meaning lower compulsory repayments
• Repayments are now calculated on a marginal basis—only on income above $67,000, not total income
• Some lenders are now excluding HECS debt from serviceability assessments entirely if the balance will be repaid within 12 months

What This Means for Your Borrowing Power

Lenders typically reduce borrowing capacity by approximately 10 times your annual HECS repayment. With lower compulsory repayments under the new marginal system, combined with the 20% debt reduction, many first home buyers will see a material improvement in what they can borrow.

For example, someone with a $70,000 HECS debt earning $125,000 would see their balance drop to approximately $56,000 after the reduction—an immediate saving of $14,000. More importantly, their ongoing repayment obligation decreases, which directly impacts serviceability calculations.

Combined with the Stage 3 tax cuts that have been flowing through since July 2024, high-income earners could see their borrowing capacity increase by $25,000 to $75,000 or more, depending on their circumstances.

Bonus #2: The Expanded Home Guarantee Scheme

From 1 October 2025, the Federal Government’s Home Guarantee Scheme received its most significant expansion ever. The changes are transformational for first home buyers, particularly in high-value markets like Sydney.

Key Changes

• Property price cap for NSW capital cities and regional centres: $1.5 million (up from $900,000)
• Income caps: Completely removed (previously $125,000 for singles, $200,000 for couples)
• Available places: Unlimited (no more missing out due to limited allocations)
• Minimum deposit: Just 5%, with the government guaranteeing up to 15% of the property value

The Immediate Impact

Government data released in November shows the scheme’s immediate impact: 5,778 guarantees were issued in October 2025 alone—a 48% increase compared to October 2024. This represents approximately one in every ten homes sold nationally during the month.

For Sydney buyers, the practical benefit is substantial. Someone purchasing a $1.2 million property could save approximately $40,000 to $70,000 in Lenders Mortgage Insurance by using the scheme—money that stays in your pocket rather than protecting the bank.

The Market Context: Why Timing Matters

CoreLogic data shows national home values rose 1.1% in October 2025—the fastest monthly gain since June 2023. The annual growth rate has now reached 6.1%, with momentum building since the first RBA rate cut in February.

Significantly, properties in the lower and middle price segments are showing the strongest growth (1.2% to 1.4% in October), reflecting the impact of the expanded Home Guarantee Scheme and ongoing affordability pressures pushing buyers toward these market segments.

Sydney’s median dwelling price now sits at approximately $1.26 million, with houses at $1.58 million and units at $886,000. While prices continue to rise, the combination of the HECS reduction and expanded scheme creates a window of opportunity that may not last.

What This Means for You

The ‘wait and see’ strategy is becoming increasingly risky. Here’s why:

1. Increased competition: With income caps removed and unlimited places available, more buyers are entering the $1.0m–$1.5m bracket than ever before
2. Price momentum: Property values are rising faster than most buyers can save, with national values up over 6% annually
3. LMI savings: A 5% deposit scheme on a $1.2m property saves approximately $40,000–$70,000 in insurance costs alone
4. Borrowing power boost: The HECS reduction combined with tax cuts could increase your capacity by tens of thousands of dollars

Your Next Steps

If you’re a first home buyer with HECS debt, now is the time to reassess your position:

• Check your updated HECS balance via myGov after linking to ATO Online Services—most reductions will be processed by late 2025
• Get pre-approved through a participating lender under the Home Guarantee Scheme—there are over 30 lenders available
• Speak with a mortgage broker who understands how different lenders treat HECS debt—some are more generous than others
• Model your full 30-year picture to understand total costs, not just monthly repayments

The combination of lower student debt and the ability to buy with a 5% deposit means your entry point is likely right now, before 2026 brings further price growth and increased competition.

Ready to Take the Next Step?

At Sanford Finance, we specialise in helping first home buyers navigate these complex policy changes. Our team can assess your updated borrowing capacity, identify the best lenders for your situation, and guide you through the Home Guarantee Scheme application process.

Contact us today for a free assessment and find out how these changes could help you get into your first home sooner than you thought possible.

Disclaimer: This article provides general information only and does not constitute financial advice. Your personal circumstances may vary. The information in this article was current as at November 2025. Please contact Sanford Finance or speak with a qualified financial adviser before making any decisions about your home loan.