An expanded five per cent first home deposit scheme will come into effect on Wednesday, fulfilling a core government election pledge, but some observers are warning of the effect it will have on a frenzied housing market.

All first home buyers will be able to enter the property market with a five per cent deposit, with the rest of the deposit backed by the government under the Labor scheme.

It's set to kick off on Wednesday, October 1.

Under the changes, all first home buyers will have access, with no caps on places or income limits, according to government statements.

Property price caps will also be set higher in line with average house prices, providing access to a greater variety of homes.

The government expects first home buyers using the scheme in just its first year are expect

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