Key takeaways

• Base Rate is on hold, but mortgage rates are rising: The Bank of England kept the base rate steady at 3.75% in September, but average fixed mortgage rates have crept up close to 6%. Don't assume a base rate freeze means borrowing costs are static.
• A major new first-time buyer scheme is coming: The government announced plans for Your First Home, a new equity loan scheme allowing eligible buyers to purchase a new-build with just a 2.5% deposit. Full details will be revealed at the Budget on 28 October.
• Waiting to remortgage could prove costly: Nearly 750,000 households face deal expirations in 2026, with repayments set to rise by roughly £170 a month on average. Securing a rate early protects you against further rises, and with tools like RateCheck, you can still switch if a lower rate appears before you complete.
• Inflation and energy costs are squeezing savings: CPI inflation rose to 3.1% in August, while Ofgem's price cap increased energy bills by 4% in October. Leaving savings in low-yielding accounts means inflation will erode your real purchasing power over time.
• The Autumn Budget could bring tax and ISA shifts: Beyond the new Your First Home scheme, we’re watching for details on a proposed First Time Buyer ISA, potential council tax surcharges on high-value homes, and possible Capital Gains Tax reforms.

Mortgage rates are on the move (again)

If you’ve been keeping an eye on mortgage rates recently, you might have noticed deals are changing quickly.

The Bank of England held the base rate at 3.75% in September, but that hasn’t stopped mortgage rates from rising. Why? Fixed mortgage rates aren't determined by the base rate alone. They’re also heavily influenced by financial markets and where investors think interest rates and inflation could be heading next.

And right now, there’s plenty of uncertainty. 

As of 29 September, the average two-year fixed mortgage rate had reached 5.93%, while the average five-year fix stood at 5.94%. 

It hasn’t all been movement in one direction, though. While mortgage rates have generally risen through September, some lenders have also cut selected deals. So, although the overall picture has become more expensive, there are still competitive deals appearing across the market.

Meanwhile, higher interest rates have led to more modest price growth or slight cooling in London and parts of the South East. For buyers, this simply means that affordability, deposit requirements, and borrowing power vary significantly depending on where you're looking to purchase.

And with different lenders moving their rates at different times, it’s particularly important to compare the wider mortgage market. A deal that looks competitive one week might not be the strongest option the next.

When it comes to house prices however, it’s essential to look beyond nationwide averages, as regional markets are behaving quite differently. According to recent lender and official price indices, property values in the North East (+4.9%) and North West (+4.7%) continue to see steady annual growth, supported by lower entry prices and relative affordability.

What does that mean for people remortgaging?

There’s another reason the current mortgage market matters: hundreds of thousands of homeowners are still coming off much cheaper fixed-rate deals.

The Bank of England estimates that nearly 750,000 households will reach the end of mortgage deals fixed below 3% during 2026. For those households, the average increase in repayments is expected to be around £170 a month. 

So if your current mortgage is due to end in the next few months, it can be worth looking at your options early rather than waiting until your deal expires. You can typically remortgage up to 6 months before your current deal expires, and if a lower rate becomes available, reapply before you switch – giving you more time to understand what your new repayments could look like.

For savers, there’s a different story

While rising rate expectations have made things more challenging for mortgage borrowers, they can have the opposite effect on savings rates.

Many savings providers increased their rates over the summer; from Cash ISAs to Lifetime ISAs. Rate wars broke out amongst providers, meaning savers could tap into rates well above the 3.75% base rate. The average one-year fixed savings rate increased from 4.23% to 4.28% between the beginning of August and September, its highest level since October 2024. The average one-year fixed ISA rate also reached 4.26% in September, a two-year high.

But there’s an important part of the savings picture to keep an eye on: inflation.

The latest ONS figures show that CPI inflation increased from 2.9% in July to 3.1% in August, moving further above the Bank of England's 2% target. Transport costs, particularly petrol and diesel, were the biggest contributor to the increase.

Higher inflation matters to savers because it reduces the spending power of your money over time. Put simply, if the cost of living is rising by 3.1% a year, money earning no interest is losing purchasing power in real terms.

Adding to the squeeze on household budgets, Ofgem’s latest energy price cap increase comes into effect today (1 October). The 4% rise pushes the typical household usage bill up to £1,723, marking its highest level in nearly three years.

With utility costs going up alongside 3.1% CPI inflation, day-to-day living expenses could be eating into disposable income. For anyone trying to build a house deposit or protect their emergency fund, it’s worth checking the rate your savings are earning, particularly if your money has been sitting in the same account for a while.

All eyes on the Autumn Budget

Attention is now turning to 28 October, when Chancellor John Healey will deliver the Autumn Budget.

The Budget is one of the biggest financial events in the government calendar. It’s where the Chancellor sets out the state of the UK economy, alongside the government’s plans for tax and the public finances, accompanied by new economic forecasts from the independent Office for Budget Responsibility (OBR). 

And the decisions announced can have a very real impact on our money. Last year’s Autumn Budget included some big changes for savers and homeowners, from cutting the annual Cash ISA allowance to £12,000 for under-65s from April 2027, to introducing a new council tax surcharge on homes worth more than £2 million and increasing tax rates on savings income from 2027.

This year, there’s plenty for homebuyers, homeowners and savers to keep an eye on.

The government is under pressure to balance its spending plans against a difficult backdrop for the public finances. Government borrowing reached £18.3 billion in August, £3.5 billion more than official forecasters had expected, while the cost of servicing government debt reached £8.8 billion – the highest August figure since records began in 1997. 

So, what could the Budget mean for your money?

Your First Home: a new 2.5% deposit scheme

One announcement we already know is coming is Your First Home, the government’s new equity loan scheme for first-time buyers in England. 

Under the plans announced in September, eligible first-time buyers will be able to purchase a new-build home with a 2.5% deposit, alongside a government-backed equity loan worth 20% of the property’s value. The equity loan will have an initial interest-free period, although the government hasn't yet confirmed how long this will last. 

So, for example, buying a £200,000 home could look like:

• £5,000 buyer deposit (2.5%)
• £40,000 government-backed equity loan (20%)
• £155,000 remaining to fund through a mortgage

The scheme has similarities to the previous Help to Buy equity loan, but reduces the minimum deposit from 5% to 2.5%. It’ll also have household income limits and local property price caps to determine who and which properties are eligible. Participating developers will be expected to contribute towards the cost of the scheme, with the full details and implementation timeline due to be confirmed at the Budget.

To read our full rundown of Your First Home scheme, see our blog here.

Will we hear more about the Lifetime ISA replacement?

Earlier this year, the government launched a consultation on plans for a new First Time Buyer ISA, which would eventually be offered to new savers in place of the Lifetime ISA. The consultation closed in August, but the final design and launch date haven't yet been announced.

Under the proposals, the new account would be specifically for buying a first home, rather than doubling as a retirement savings product.

There are some potentially significant differences from the current LISA being considered. The proposed account would have no upper age limit and no withdrawal penalty, while the government bonus would be paid towards the purchase of a first home rather than added to the account as you save.

But some of the biggest questions are still unanswered, including the annual contribution limit, size of the government bonus and maximum property price.

For existing LISA savers, nothing has changed yet. LISAs remain available under the current rules, and existing holders can continue saving into them and receiving the 25% government bonus on eligible contributions.

The Budget could therefore be an important moment to watch for further detail on what happens next.

What about Stamp Duty and property taxes?

Property taxation has also generated plenty of headlines ahead of 28 October.

One of the bigger ideas discussed has been a more fundamental shake-up of the way property is taxed, including suggestions that Stamp Duty and council tax could eventually be replaced or reformed through a tax linked more closely to property or land values.

That isn't entirely out of nowhere: Andy Burnham has previously argued for reform of property taxation and has spoken about shifting more of the tax burden away from work and towards wealth.

However, anyone hoping for Stamp Duty to disappear this month probably shouldn't get too excited. Burnham has more recently appeared to rule out scrapping or changing Stamp Duty at this Budget, telling reporters when asked about it: “That won't be happening.”

So while broader reform of property taxation could remain part of the conversation, Stamp Duty changes now look unlikely at this Budget.

Council tax has also been part of the discussion, including ideas around changing how higher-value properties are taxed. The government already plans to introduce an additional annual surcharge from 2028 on homes in England worth £2 million or more, while recent reports have suggested the threshold could be lowered to £1.5 million.

There has also been discussion around treating holiday lets as second homes for council tax purposes rather than businesses.

For now, these remain areas to watch rather than changes to plan your finances around.

Could Capital Gains Tax change?

Another area attracting attention is Capital Gains Tax (CGT).

There has been discussion ahead of the Budget about whether the government could increase CGT as part of a wider shift in how income and wealth are taxed. One idea being discussed is bringing CGT rates closer to Income Tax rates, although no such change has been announced.

Currently, CGT is generally charged at 18% or 24%, depending on your taxable income and the size of your gain. You don't usually pay CGT when selling your main home, so any changes would be particularly relevant to people selling additional properties or other taxable assets.

Any changes here would therefore be most relevant to landlords, second-home owners and people selling additional properties.

What happens next?

There’s still plenty we don’t know ahead of 28 October. We know Your First Home will be confirmed at the Budget, but important details, including who’ll be eligible and how the equity loan will work – are still to come. We’ll also be watching for any updates on the proposed First Time Buyer ISA, alongside any changes affecting homeowners, mortgage borrowers and savers.

Until then, remember that much of what you’ll read about the Budget is still speculation. We’ll be covering the announcements that matter to your money as they happen, so keep an eye on the Tembo blog for the latest Budget updates and what they could mean for you.

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