The idea conflicts with this report from March that purported to show the 5S’ (mechanical) home button. However, I actually think a capacitive sensor replacing the physical Home Button is a very plausible scenario, for a couple of reasons.
It’s clear that Apple wants to have a fingerprint sensor on the next iPhone and they need to put it somewhere. The Home Button, conceptually, is the most elegant location. In practical terms, though, integrating the biometric sensor into a mechanical button is a significant engineering problem. Making the iconic Home Button capacitive makes that integration simpler without sacrificing most of the usability of the Home Button. Capacitive buttons are already very common across Android phones — consumers are used to them.
Moreover, Geniuses have told me that one of their biggest support issues are related to faulty Home Buttons. Eliminating the mechanical elements of the button would both improve the reliability of this part of the phone and remove considerable burden from Apple’s support services, including the Genius Bar.