Tembo Market Watch: September 2026

Key takeaways

• First-time buyers: Affordability is showing signs of improving. Average house prices now stand at around 7.6 times average earnings, down from almost 9x in 2021. Mortgage repayments are also moving closer to their long-term average compared with take-home pay.
• Remortgagers & movers: Around 800,000 fixed-rate mortgages at 3% or below are expected to end each year through to 2027. If yours is one of them, today's rates could mean a noticeable jump in repayments.
• Savers: Staying loyal to a low-paying savings account could be costing you. New research estimates British savers are missing out on around £12bn of interest every year, while competitive savings rates remain available.
• The bigger picture: Inflation rose from 2.6% to 2.9% in July, largely because of higher energy bills. The Bank of England has kept its Base Rate at 3.75%, with its next decision due on 17 September 2026.

First-time buyers: Is affordability finally improving?

If buying your first home has felt like a constantly moving target over the last few years, there are some encouraging signs. At the height of the post-pandemic property boom in 2021, average UK house prices reached almost 9 times average earnings. That figure has now fallen to around 7.6 times earnings.

That's largely because house price growth has slowed while wages have continued to rise. And there’s another positive sign. In 2007, the average first-time buyer’s mortgage repayments were equivalent to around 45% of their take-home pay. Today, that figure is around 32%. That's still slightly above the long-term average of around 30%, but it suggests some of the extreme affordability pressure seen over recent years is beginning to ease.

However, getting enough money together upfront remains one of the toughest parts of buying a first home, and where you live makes an enormous difference. A typical 10% deposit on a first-time buyer home ranges from around:

• £13,100 in the North
• £13,900 in Scotland
• £17,400 in the North West
• £24,700 in the South West
• And a massive £44,800 in London

And saving that amount is particularly difficult when you're renting at the same time. Young private renters typically spend around 32% of their income on rent, compared with just 4% among those living with their parents. 

Could you buy with a smaller deposit?

Some lenders now offer mortgages requiring deposits of just 5%, which could mean you don't need to save as much as you originally thought before exploring your options. Lenders are also increasingly offering longer mortgage terms, in some cases up to 40 years, which can reduce monthly repayments.

There are other routes that could help make buying more achievable too. Depending on your circumstances, you could buy a share of a home through Shared Ownership, boost your deposit with family support through a Deposit Boost, or add a loved one’s income to your mortgage with an Income Boost. Some buyers may also qualify for higher lending options that allow them to borrow 5 or even 6 times their income, while longer mortgage terms (in some cases up to 40 years) can help reduce monthly repayments, although you’ll usually pay more interest overall.

So if you worked out your buying budget a year or two ago, it could be worth checking again before assuming you need to keep saving. Your current deposit might take you further than you think.

Why buying still isn't easy

Unfortunately, the improvement in affordability doesn't mean Britain's housing problem has disappeared. Homeownership among younger generations remains far lower than it was for previous generations. By age 28, around 27% of people born between 1991 and 1995 owned their home, compared with 47% of those born between 1961 and 1965 at the same age.

A shortage of new homes remains part of the problem. Previous government estimates suggested England needs around 300,000 additional homes each year to keep up with demand. Only around 208,000 were added last year, and Britain hasn't consistently built close to 300,000 a year for decades. Building has become significantly more expensive too. Construction material costs have risen faster than general consumer prices since 2015, while skills shortages and higher land, labour and energy costs have all added pressure.

So while affordability is moving in a more encouraging direction, there is still a long way to go before buying becomes as accessible as it was for previous generations.

Remortgagers & movers: Is your current deal ending soon?

There's another big shift working its way through the mortgage market. Around 87% of mortgage customers are currently on fixed-rate deals. That means changes to the Bank of England Base Rate don't immediately alter their monthly repayments.

But they do matter when those deals come to an end. Around 800,000 fixed-rate mortgages at 3% or below are expected to expire each year, on average, through to the end of 2027.

That's roughly 2,200 households every day reaching the end of one of these cheaper deals. And today's rates look very different.

As of 1st September, the average new:

• Two-year fixed mortgage was 5.52%
• Five-year fixed mortgage was 5.64%

For context, the average two-year fix was 4.83% at the beginning of March.

So if you're coming off a deal below 3%, there could be a significant difference between your existing mortgage payment and what's available today.

Could your money be earning more?

This might be the easiest win in September's Market Watch.

New research suggests almost two-thirds of British savers have stayed with the same bank for more than a decade. And that loyalty could be expensive. Hargreaves Lansdown estimates British savers are collectively missing out on around £12bn in interest every year by leaving their money in accounts paying poor rates. Only 34% of those surveyed said they'd moved their money in the previous 12 months. The message isn't that you should endlessly open and close savings accounts. But it is worth knowing what your current account is actually paying.

So if you haven't checked your savings rate recently, take a couple of minutes to find out what you're getting. There could be a better home for your money.

Inflation is back up, but what does that actually mean?

UK inflation rose to 2.9% in July, up from 2.6% in June, its highest level for four months. The biggest reason was household energy costs. Ofgem increased the energy price cap by 13% from 1 July, adding around £221 a year to the typical household energy bill.

There could be more pressure to come. Experts are now expecting the energy price cap to rise by a further 4% in October. There was some good news in the latest figures, though. Food prices were rising at 1.3%, their slowest pace for nearly five years.

However, it’s worth remembering that the headline inflation figure is an average based on a basket of hundreds of different goods and services. No-one buys all of them.

So if a large proportion of your spending goes on things like energy, fuel or rent, your personal experience of rising prices could feel very different from the headline 2.9% figure.

What could happen to interest rates next?

The Bank of England has kept the Base Rate at 3.75% for five meetings in a row. At the beginning of 2026, markets had expected rates to fall further. The conflict in the Middle East and subsequent rise in energy prices changed that outlook. The latest inflation figures don't necessarily mean an interest rate rise is coming, though.

Some economists believe the Bank may keep rates unchanged if the rise in inflation is largely driven by temporary energy costs and underlying price pressures remain contained. The Bank has warned that inflation is expected to rise again later this year as higher energy costs feed through.

One of the most important things to understand is that mortgage and savings rates can change even when the Base Rate doesn't. Banks and lenders respond to their own funding costs, competition and what financial markets expect interest rates to do next. That's why one mortgage lender might cut its rates while another raises them, and why savings providers can change their rates between Bank of England meetings.

The next interest rate decision is confirmed for Thursday 17 September 2026.

The bottom line

There are some genuine reasons for optimism this month.

For first-time buyers, homes are becoming more affordable relative to earnings, and some buyers have more options around deposits and mortgage terms than they did a few years ago.

For savers, competitive rates are still available, but research suggests billions of pounds of potential interest is being missed simply because people haven't checked what their existing account pays. And for homeowners coming off much cheaper fixed-rate mortgages, acting early can give you more time to understand your options before your current deal ends.

Inflation means the outlook for interest rates remains uncertain. But you don't need to predict exactly what the Bank of England will do next. Knowing what you're earning, what you're paying and what options are available to you today is a much better place to start.

Full terms and conditions of our rate checking service can be found here.

Tembo's HomeSaver Cash ISA: Earn 5.5% AER (variable) including conditional bonuses. Comprising a 2.8% AER (Variable) base rate, a conditional 1-year 2.7% AER (Fixed) HomeSaver bonus payable after 12 months if you complete a mortgage through Tembo Money Limited within 3 years. Account must remain open until bonus is paid. One HomeSaver bonus payable per mortgage. The Tembo HomeSaver Cash ISA is not flexible; withdrawals cannot be replaced and will count towards your annual ISA allowance.