London first-time buyers almost £12,000 worse off after five years of owning versus renting.
High property prices mean delaying a purchase can pay off in London in the short term – while first-time buyers in northern cities risk losing thousands by waiting.
Key findings from the Tembo First-Time Buyer Index Q2 2026 include:
London first-time buyers would be £11,854 worse off after five years compared with if they continued renting and invested their deposit.
In Newcastle, a first-time buyer would be £89,172 better off after five years from buying, creating a postcode penalty of over £100,000 for those buying in London.
The pattern is repeated across northern cities: after five years, buyers are £80,987 better off in Manchester, £70,026 better off in Leeds and £61,606 better off in Liverpool if they buy rather than continuing to rent and investing their deposit.
Soaring property prices, large deposits and higher mortgage costs are making the financial case for buying a first home in London increasingly difficult in the short term, according to the latest Tembo First-Time Buyer Index: The Postcode Penalty.
Thanks to high house prices and stagnant property growth, London presents a particular challenge for first-time buyers. The average buyer needs to borrow the equivalent of 8.66 times their income to get onto the property ladder, yet house prices have seen 0% growth over the past five years.
Northern cities tell a very different story. In Manchester first-time buyers need to borrow an average of 4.38 times their income (roughly half the London level) while property prices have risen 16.9% over five years.
London first-time buyers need an average deposit of £121,660 – more than three times the £37,180 required in Liverpool and more than four times Hull’s £27,940. And the disparity continues after buying. After five years, a London first-time buyer is £11,854 worse off from buying rather than continuing to rent and investing their deposit. In Newcastle, a first-time buyer is £89,172 better off, a difference of more than £100,000.
The Tembo First-Time Buyer Index
The quarterly index compares the financial position of someone buying today with someone who continues renting and invests their deposit for another year. It takes into account rental costs, mortgage repayments, equity built through capital repayment, projected house price movements and investment returns on the deposit.
The latest findings reveal a striking divide in the economics of buying across Britain.
London buyers face a very different route to home ownership
The findings highlight the particular challenge facing aspiring homeowners in London, where the amount required to get onto the property ladder can make waiting appear financially more attractive in the short term.
For first-time buyers, the decision is not simply whether they can afford a monthly mortgage repayment. They also need to accumulate a substantially larger deposit and borrow enough to bridge the gap between earnings and property prices.
That means Londoners can face a difficult trade-off: continue renting while building a larger deposit, compromise on the size or location of the property they buy, or look beyond the capital for a home where their money goes further.
Affordability recovery stalls
The findings of Q2’s First-Time Buyer Index contrast sharply with those from Q1, which saw the most affordable conditions for first-time buyers in more than two years.
That recovery stalled in Q2 as rising house prices and mortgage rates increased the financial pressure on buyers.
The Tembo First-Time Buyer Attractiveness Score fell from 637 to 598, moving from the ‘High’ to ‘Moderate’ category as affordability deteriorated across multiple measures.
While buyers had more properties to choose from in almost every city analysed, higher purchase prices, larger deposits and higher interest rates offset those gains. House prices increased in 14 of the 21 cities analysed, while both deposits and loan-to-income ratios rose in 70% of cities.
Richard Dana, CEO and co-founder of Tembo, said:
Richard Dana, CEO and co-founder of Tembo
“London has always been a challenging place to buy a first home, but the financial equation facing buyers in the capital is becoming increasingly difficult. The upfront cost of buying is now so high that waiting can appear to make better financial sense in the short term. That leaves aspiring homeowners with some difficult choices: continue renting and saving, compromise on the home they buy, or look outside London for somewhere their money will go further.”
“That doesn’t mean buying a home is no longer worthwhile. Over the longer term, home ownership remains one of the most effective ways to build wealth, and provides many benefits outside of wealth generation alone. But our findings show just how different the journey has become depending on where in the country you are trying to buy.”
About the Tembo First-Time Buyer Index
Published quarterly, the Tembo First-Time Buyer Index tracks how accessible home ownership is across the UK’s largest cities. The index combines proprietary Tembo customer data with publicly available datasets, including figures from the Office for National Statistics, to analyse affordability, deposits, borrowing requirements, mortgage costs, housing supply and the long-term financial impact of buying versus renting.
In the Q2 Index: The Postcode Penalty, the Northern cities included are: Leeds, Liverpool, Manchester, Sheffield, Bradford, Hull and Newcastle. The Southern cities included are: London, Bristol, Southampton, Brighton.
