A 2.5% deposit scheme, a £1.5m tax line: UK housing this week

If you're trying to work out whether this is a good week to be a first-time buyer, a fixed-rate homeowner, or a landlord sitting on a rental worth more than you thought, the honest answer is that this week handed each of you something different. A brand new government scheme just promised first-time buyers a way in on a 2.5% deposit. Mortgage rates kept climbing regardless. And anyone with a valuable home just got a fresh reason to check where the tax lines might move in a month's time. None of it is simple, but all of it is relevant to a decision someone reading this is making right now.

Here's what actually happened in UK housing this week, and what each story means if you're the one making the call.

A new first-time buyer scheme: 2.5% deposit, 20% equity loan

The government announced a new "Your First Home" scheme on 26 September 2026, promising first-time buyers a route onto the ladder with a deposit of just 2.5%, backed by a 20% government equity loan carrying an interest-free period, on new-build homes only, in England only (GOV.UK, ITV News, Bloomberg, 26 September 2026). Prime Minister Andy Burnham said the scheme would "get them the keys to their own front door, and give builders confidence" to deliver more homes, while Deputy Prime Minister Angela Rayner called it a way to "make getting on the first rung of the property ladder just that bit easier." Household income caps and local property price caps are both confirmed as part of the design but not yet published, developers will need to sign up and contribute fees to participate, and full terms, costs and a firm launch date are due at the Autumn Budget on 28 October 2026, with pre-registration expected to open before the end of the year.

On an illustrative £300,000 new-build, a 2.5% deposit is £7,500 against £15,000 for today's typical 5% minimum, and the 20% equity loan (£60,000) would cut the mortgage needed to around £232,500 rather than £285,000. At a best-buy rate of 4.69%, that's a repayment mortgage of roughly £1,318 a month, well below the roughly £1,821 a month a 95% loan-to-value mortgage at a typical current rate would cost on the same purchase, before accounting for whatever the equity loan itself eventually costs once its interest-free period ends. It's the same basic trade-off Help to Buy borrowers are still living with today, covered in our Help to Buy repayment guide: a smaller deposit today in exchange for a second loan to manage later.

So if a 5% deposit has been the wall stopping you from buying a new-build, this is a genuine reason to hold off registering with any deposit-boosting product until the Budget clarifies the price caps and your area's eligibility, rather than assuming it definitely helps your specific situation.

Mortgage rates: a third straight month of rises

Whole-market average fixed rates kept climbing this week, with the average five-year fix now at 5.91%, its highest level since November 2023 and up from 4.94% as recently as March 2026 (Moneyfacts, via HomeOwners Alliance, 26 September 2026). The average two-year fix sits close behind at 5.77%. Best-buy deals have held their ground better than the averages: Danske Bank's 4.69% two-year fix at 85% loan-to-value and Barclays' 4.83% five-year fix at 60% loan-to-value are both still on the table as of 26 September, an unusually wide gap to the whole-market average that rewards anyone who shops rather than accepts their existing lender's standard offer. None of this is a Bank Rate story: the Bank of England held Bank Rate at 3.75% at its 17 September meeting and isn't due to meet again until 5 November, so this rise is coming entirely from swap-rate pressure tied to the escalating Middle East conflict, not from anything the Bank itself has done.

On a typical £250,000 25-year repayment mortgage, the move from March's 4.94% average to today's 5.91% average adds roughly £144 a month, or about £1,730 a year, to a like-for-like remortgage. The gap between today's best-buy and average rates is worth even more: on a £300,000 mortgage, choosing the 4.69% best buy over the 5.77% average saves roughly £191 a month. If you'd rather not gamble on where rates go next, our product transfer versus remortgage guide sets out how to compare your existing lender's offer against the wider market before you commit.

So if your fix ends in the next six months, this week's data argues for reserving a rate now rather than waiting, since most lenders let you reserve one three to six months out and switch down for free if a cheaper deal appears before you complete.

Rightmove records its first monthly price rise since May

Newly-listed asking prices rose 0.7% in September, the first monthly increase since May, even as the number of homes for sale hit a 12-year high for this time of year (Rightmove House Price Index, published 21 September 2026). The average asking price now stands at £367,440. Underneath that modest rise, the market is still working through a backlog: 61% of listed homes are finding a buyer nationally, against 74% back in 2021, and the average home now takes 64 days to find a buyer and a further 150 days to complete. Rightmove's Colleen Babcock described it as "a modest recovery rather than a major turning point," which matches what we've been seeing all autumn: individual data points nudging upward while the underlying pace of sales stays slow.

So if you're a seller wondering whether this is finally the turn everyone's been waiting for, treat one month of rising asking prices against a 12-year stock high as a reason to price realistically and expect a longer wait for a buyer, not as a green light to chase last year's valuation.

Fewer borrowers are locking in early, more need help with payments

New FCA data on Mortgage Charter uptake shows 381,364 borrowers locked in a new fixed deal up to six months before their old one expired in the second quarter of 2026, down from 499,271 in the first quarter (FCA Mortgage Charter uptake data, published 8 September 2026). At the same time, the number using a payment-difficulty measure, such as a temporary switch to interest-only payments or a term extension, rose to roughly 22,400 in Q2 from around 20,100 in Q1. Put those two numbers together and the picture is of a market where fewer borrowers are getting ahead of their renewal and more are needing help once they're already there, a shift that lines up with the rate rises covered above.

So if you've been putting off contacting your lender about a fixed rate ending soon, this data is a nudge in the other direction: reserving a new deal early remains free to arrange and free to walk away from if a better rate turns up, which is a materially better position to be in than needing a payment-difficulty measure once the old rate has already expired.

A mansion tax threshold that could catch 271,000 homes

The high-value council tax surcharge due from April 2028, currently set to apply to homes worth £2 million or more and add £2,500 to £7,500 a year on top of existing council tax, catches an estimated 134,000 homes at that level. Treasury officials are reportedly weighing a cut to a £1.5 million threshold ahead of the 28 October 2026 Autumn Budget, which would add roughly 137,000 further homes to scope, taking the total to around 271,000 and raising an estimated extra £800m a year for the Exchequer (LBC, September 2026). A Treasury spokesperson declined to confirm the figure, saying only that tax decisions are set out at fiscal events, while the Prime Minister has separately ruled out changes to stamp duty itself in the same Budget.

So if your home might sit anywhere between £1.2 million and £2 million, get a realistic, up-to-date valuation before Budget day, not after it, because a charge that starts in 2028 is still worth planning your finances around three years out.

Buy-to-let incorporation is losing momentum

New buy-to-let company formations fell 8% in the first eight months of 2026 compared with the same period in 2025, and were down 22% year-on-year in August alone, putting 2026 on track for the first full-year decline in new BTL company formations since 2008 (Hamptons, via Companies House data, 15 September 2026). The report's own explanation is straightforward: the landlords who gain the most from moving a rental into a limited company, typically higher-rate taxpayers planning to hold for years, have largely already made the switch since Section 24 first squeezed personal-name mortgage interest relief. New purchases now make up 51% of 2026's incorporations, overtaking transfers of existing portfolios for the first time, which tells you the wave of landlords restructuring what they already own has crested.

So if you're a higher-rate taxpayer still holding a rental in your own name with no plan to sell for years, the case for incorporating hasn't disappeared just because the trend has slowed, but you should run the stamp duty and capital gains cost against your own Section 24 numbers rather than assume everyone who was going to do it already has.

What this means for you

Taken together, this week's stories split cleanly by where you sit. If you're saving for a first home, the new scheme is worth watching but not worth planning around until the Budget confirms the price caps and your area's eligibility, so keep saving as if it might not apply to you. If you're coming up to the end of a fixed rate, the data points in one clear direction: rates have risen for three straight months, best-buy deals are pulling further away from the average, and fewer borrowers are getting ahead of their renewal than were six months ago, so reserving a rate now while it costs nothing to change your mind later is the safer bet than waiting to see where rates land. And if you own a home anywhere near £1.5 million or hold a rental in your own name as a higher-rate taxpayer, both of this week's tax stories argue for getting your own numbers in order before the Budget, not after it. Most people who run these five stories together end up doing the same thing: acting on the parts of the picture that are already confirmed, and treating the parts that aren't, like the new scheme's caps, as reasons to wait and check rather than reasons to change course today.