"One of the great mistakes is to judge policies and programs by their intentions rather than their results." - Milton Friedman
The quote looks to the deep dive where we look into potential policies to help to support what is broadly an unviable market at this time for delivering new build housing at any sort of scale in the UK.
As the calendar advances through the Golden Quarter, our next Property Business Workshop is live and tickets are already selling. This is about structure, and exit - yours, and others. No exit plan? You go out one way or another. Things have changed, as well, with pensions being brought into the scope of your personal estate. What does this mean for SSAS - according to people that use them, but don’t sell them - an objective viewpoint. Book in on the next Property Business Workshop with myself and Rod Turner - Wednesday 22nd April - Central Manchester - www.tinyurl.com/pbwten
Kicking off, then, as has become customary - Trumpwatch. I wonder if this section will ever be a quiet one? I strongly suspect not.
The Middle East situation has gone from a hopeful simmer back to a rolling boil this week, and for those of us trying to read the macroeconomic tea leaves, it has been a brutal few days of recalibration. After the ceasefire optimism we saw earlier in the month, the day traders who confidently bet the house on the "TACO" trade - Trump Always Chickens Out - are suddenly sweating through their shirts. The diplomatic veneer has been unceremoniously stripped back since last Sunday, replaced by a much harder, infinitely more expensive military stance.
Let's look at the timeline. On Thursday the 16th, US Defense Secretary Pete Hegseth was sent out to deliver a classic administration ultimatum. He fired a shot across the bow, warning that American forces are fully prepared to "restart combat operations" if Tehran rejects the current nuclear agreement proposals. We aren't just talking rhetoric, either. The Pentagon confirmed that deterrence operations are now fully active, with upwards of 10,000 US troops deployed to support rapid-response readiness and, crucially, maritime enforcement.
What does "maritime enforcement" actually look like in practice? As of Friday the 17th, it looks like targeted naval blockades. The US is now actively squeezing ships heading to or from Iranian ports. Combine that with Iran’s ongoing shutdown of the Strait of Hormuz, and you have a massive dual bottleneck that is heavily, almost violently, disrupting global energy and commodity supply chains. It is high-octane, high-risk stuff from The Donald. It's the classic "face-up poker" way of playing foreign policy - brash, front-foot, and unapologetically disruptive.
But the economist in me looks at this geopolitical chess match and thinks only one word: Inflation.
And indeed, the markets are reacting exactly as you'd expect. This energy shock is rippling outwards, and the bond vigilantes are twitching. If wholesale oil and gas prices stay elevated - and with a dual blockade, it’s hard to see how they don't - the knock-on effects are severe. It puts the Federal Reserve in an incredibly tricky position regarding those interest rate cuts the administration has been so desperate for. How do you slash rates when geopolitical supply shocks are busy pumping up energy prices? You don't.
But let's bring this transatlantic macro-noise back to our shores, because this is where it hits the UK property market square in the jaw.
Andrew Bailey and the Bank of England are suddenly looking at a totally different inflation trajectory than they were a few weeks ago. A YouGov/Citi poll of market expectations released on Friday showed analysts now believe UK inflation could surge back up to 5.4% this year. Panmure’s Simon French was a little more optimistic at 3.5% to 4%, but regardless of the exact decimal point, the "rate cut" narrative for 2026 is rapidly disintegrating. Rabobank came out on Thursday and officially ruled out any UK interest rate cuts this year.
For the property market, the translation is grim but necessary to understand. Higher inflation expectations mean higher SWAP rates. Higher SWAP rates mean lenders pull their cheaper mortgage products and re-price upwards. All this has already happened.
The City has already started pricing this in. On Tuesday the 14th, Deutsche Bank dropped a bombshell, officially reversing their 2026 housing outlook. They’ve gone from projecting growth to forecasting UK house prices to fall by between 3% and 5% this year (they are completely wrong, by the way, but London may well continue to struggle for the moment). Meanwhile, Berenberg's Andrew Wishart is out warning of a "nasty recession" if this Gulf crisis persists beyond a short-term shock, explicitly citing a housing slump driven by weakened affordability.
We are looking at a classic negative wealth effect scenario. Landlords and homeowners, particularly in London and the South East where exposure to borrowing costs is highest, are feeling the pinch. In this current climate, flat house prices for the remainder of 2026 are suddenly starting to look like the optimistic, best-case scenario. The Middle East might feel thousands of miles away, but it is currently influencing the price of a three-bed semi in Stevenage far more than it usually does…..
Phew - transatlantic back to the safety of the real-time UK property market. Chris Watkin dunks another one.
As is customary, Chris has been relentlessly crunching the numbers over at Property Industry Eye, and his analysis for Week 14 of 2026 - covering the week ending Sunday 12th April - makes for incredibly telling reading. For those of us who spend the first half of the week staring at macroeconomic storm clouds, geopolitical tension, and bond yields, the Watkin data is where the rubber meets the road. It’s where we get to see exactly how that macro weather is raining on the micro high street parade.
We need to talk about the Easter effect for the second week, because it is written all over the data. Week 14 was Easter week 2. Historically, as any agent who has been in the game longer than five minutes knows, most metrics drop by around 10% to 15% during this period. People are busy eating chocolate eggs, dragging the kids to garden centres, and generally doing anything other than viewing houses. So, when we look at the week-on-week drops, we have to view them through that chocolate-smudged lens. But even with the seasonal dip, there are some glaring structural realities screaming out from Chris's spreadsheet, particularly when we look at the year-to-date (YTD) context and the absolute epidemic of overvaluing.
Let's start with the elephant in the room that Chris rightly highlights: the withdrawal rate. A staggering 47.4% of the homes that left UK estate agents' books in March were withdrawn unsold. Think about that for a second. Almost half of the stock being loaded onto the portals is failing to find a buyer and simply giving up. Chris nails the cause perfectly: blatant overvaluing supported by long, draconian sole agency agreements of 20-plus weeks.
He talks about this constantly and I try to translate it to those of us who are investors not agents. Don’t overprice a property that you put on the market to sell. Agents, desperate for instructions in a tighter market, are buying the listings with "hopium" valuations, locking the vendor in for five months, and then hoping the market catches up or they can batter the vendor down on price later. It is a terrible strategy, it creates a stagnant market, and it entirely explains why the bathtub of unsold stock is sitting at a chunky 717,000 homes. Don’t sign contracts with long tie-in periods for agents - it helps no-one.
Now, let's get into the Week 14 weeds. New Listings (Instructions) - on the supply side, 32,200 new properties came to the market in Week 14. Yes, this is down significantly from the 38,400 we saw last week. But before the doom-mongers start writing the obituaries for the spring bounce, remember the Easter effect. If we look at the 10-year average for Week 13/14, it sits at 30,000. So, even in a holiday week, we are still seeing above-average supply hitting the market. Looking at the YTD figures, we have had 512,000 new properties come to market so far in 2026. That is 7.4% above where we were at this point in 2024, and a whopping 16.6% higher than the 2017–2019 pre-COVID "normal" average. The stock is there. Sellers want to sell. The pipeline of supply is not the issue in this market. The issue, as always, is price and affordability.
Gross Sales (Subject to Contract) - Moving over to demand, Chris reports 20,500 homes sold Subject to Contract (STC) in Week 14. Again, a noticeable drop from 24,000 the previous week, but this is the classic Easter dip. When you compare it to the ten-year average for this specific week - which includes the frantic post-pandemic boom years - that average is 22,600. So it IS a little soft, in context - 10% down - but not catastrophically so and likely simply returns to normal next week (or a bit ahead of the 10-year average simply because week 15 is sometimes an Easter week, but won’t be for 2026). YTD, we’ve seen 342,000 homes sold STC, which is comfortably ahead of 2024 (324k) and 2023 (297k).
However, looking at the macro picture we discussed in Trumpwatch - with inflation expectations ticking up and the Bank of England heavily signalling a 'higher for longer' approach on interest rates - you have to wonder how long this resilience will last and that drop is most certainly enough for us to look very closely at next week’s “Normal week” figures. Buyers are acutely aware that mortgage rates aren't dropping anytime soon. The gap between the average listing price (£446k) and the average sale agreed price (£356k) is a massive 25.4%. The long-term average is 16% to 17%. Buyers are simply refusing to pay the inflated asking prices, and they are negotiating brutally hard.
Fall-Throughs - this is always the metric that tests the true health of the transaction pipeline. For Week 14, fall-throughs sat at 4,613. Expressed as a percentage of gross sales, that gives us a fall-through rate of 22.5%, ticking up slightly from 21% last week. Honestly? In the current economic climate, a 22.5% fall-through rate is entirely manageable. The long-term historical average is 24.2%. We are absolutely nowhere near the terrifying 40%-plus rates we saw in the immediate aftermath of the Truss mini-budget chaos.
What this tells me is that while buyers are negotiating hard at the front end (hence the 25.4% gap between listing and agreed prices), once they actually commit to a deal, they are largely sticking to it. The chains are holding together reasonably well, likely because buyers and lenders have already baked the higher interest rate environment into their affordability calculations before agreeing the sale. At the earlier points in the year, transactions do tend to hold together better, so this isn’t a permanent improvement - more of a seasonal norm (not being impacted by the war).
Net Sales; This brings us to the ultimate truth-teller: Net Sales (Gross Sales minus Fall-Throughs). For Week 14, Net Sales crossed the line at 16,000. Down from 18,500 last week (Easter strikes again), but when you look at the ten-year average for Week 14 of 17,800, it paints a picture of a market that is functioning, albeit with a slight limp. YTD, we are sitting on 268,000 net sales. That is 5.3% ahead of 2024 and nearly 10% above the pre-COVID 2017-2019 average. So, despite the geopolitical noise, despite the lack of base rate cuts, people are still moving. Life events - death, debt, divorce, downsizing, and diapers - continue to drive the transaction engine.
Price Reductions; Finally, we have to look at price reductions, the great equalizer of the property market. Chris reports 20,500 reductions this week. This is the mechanism by which that massive 25.4% gap between listing prices and agreed prices gets resolved. In March, 13.2% of all residential homes for sale had their prices reduced. The six-year long-term average is 10.7%.
As I always maintain, price reductions are not inherently evil; they are a necessary function of price discovery in a transitioning, slightly sticky market. With 47.4% of listings withdrawing unsold, the smart sellers - the ones who genuinely want or need to move/sell - are having to aggressively re-align their expectations. They are looking at the 717,000 homes sitting in the bathtub of available stock, realising the competition is fierce, and cutting their prices to match the new, diminished purchasing power of the buyer pool.
The Takeaway; Looking at the totality of Chris Watkin’s Week 14 data, the conclusion is one of stubborn resilience masked by seasonal noise and agent-induced overpricing.
The underlying transaction volume (YTD Net Sales of 268k) proves that the market isn't dead. But the catastrophic withdrawal rate (47.4%) proves that the market is utterly unforgiving of delusions. Power has firmly shifted to the buyer. If you have a solid mortgage offer and a realistic outlook, you have choice and leverage. For sellers, the message is stark. The days of testing the market with a "let's just see" asking price are over. If you want to be part of the net sales figure rather than the withdrawn unsold statistic, you have to price for the market we are in today. You have to price for a world of geopolitical tension, sticky inflation, and stubborn mortgages - not the fantasy land your over-promising estate agent pitched you on a Thursday evening in February.
Chris - this is my weekly appreciation paragraph. Thanks for what you do! If you want some help positioning yourself as a local market expert - as an estate agent or any form of property professional - give Chris a shout! Either way give his channel www.youtube.com/@christopherwatkin a follow and some love, please!
Macro-time and this week we have to lead with growth and an upside surprise (or a catchup with the excellent PMI prints that were out before the war) - we also get chance to look at the Retail Sales Monitor which we don’t touch very often - then we’ve got the Q4 UK Finance Data on Buy-to-Let lending which is always a bit slow, but nevertheless worth a look. Then we have the gilts and the swaps, as usual (that slot isn’t going anywhere before 2030, you can guarantee that).
OK - first up, the Growth report. A lovely upside surprise - let’s enjoy it. Looking backwards - and before the war - that’s the caveat. There are two ways in which growth can suffer because of the war. Firstly - NOMINAL growth is lower. The economy gets less active because less business is done, fewer investments are made, and people save more instead of consuming because they are fearful. Secondly - because growth is measured in real terms, adjusted for inflation - inflation can grow up, hurting the growth figures from the other variable involved in the calculation. Nominal growth of 4.5% at 2% inflation is 2.5% (maths aren’t perfect there) whereas Nominal growth of 4.5% at 4% inflation is 0.5% (so you can see the difference). This, however, is looking back before the war.
Expectations - 0.1% from the economic consensus. Looks very low compared to the 0.5% that was actually delivered. The high print on the PMIs was closer to a 0.2% number, especially when we consider that January had a strong PMI print but only printed 0.1% growth. 0.5% is well ahead of expectations, whichever way you look at it. Why?
To answer that, we have to look across the board. The Office for National Statistics (ONS) data shows us that all three main engines of the UK economy fired simultaneously in February. Services grew by 0.5%, production output grew by 0.5%, and the construction sector jumped by a highly impressive 1.0%. When all three pillars of the economy are pushing in the same positive direction, you get a solid 0.5% overall monthly GDP growth print.
Not only that, but the ONS went back into their spreadsheets and revised January’s completely flat 0.0% print up to a positive 0.1% growth. December 2025 also sat at 0.1%. So, instead of the stagnating winter narrative we were being fed, we actually had a steady trickle of growth that suddenly turned into a relative flood in February.
Let's carve up the sectors to see where the real momentum was hiding.
The Services Behemoth: Starting with Services, which dictates the vast majority of our economic health, we saw a 0.5% increase on the month. This marks the fourth consecutive month that services output has increased. This wasn't just a few rogue data points skewing the average either; growth was incredibly broad-based, with 12 of the 14 service subsectors showing a rise in February.
The biggest individual hero here? Wholesale trade (excluding motor vehicles and motorcycles), which surged by 1.7% and was the largest single industry contributor to the overall UK GDP in the month. We also saw a massive, face-ripping rebound in "employment activities" (part of the administrative and support sector), which grew by 2.5%. This is particularly notable because that specific subsector had plummeted by a brutal 6.6% in January.
Production and the Cyber Asterisk: Moving over to Production, we see 0.5% growth on the month, dragging the broader three-month growth figure up to a very healthy 1.2%.
But look under the hood of the manufacturing data, and you’ll find a fascinating little quirk. In the three months to February, the manufacture of transport equipment spiked by an enormous 8.9%. A sudden renaissance in British automotive dominance? Not quite. The ONS explicitly notes this is largely a "base effect" comparing back to the three months to November 2025. That previous period was dragged down heavily due to the main effects of a cyber incident at a major car manufacturer (JLR) at the end of August. Sometimes the data isn't a sign of booming structural demand; sometimes it's just the fact that the factory computers are finally switched back on and making up for lost time.
Construction - The Property Focus: Finally, we get to the sector we care about the most: Construction. On a monthly basis, it absolutely smashed it out of the park with 1.0% growth in February. The main driver behind this sudden monthly surge? Private housing new work, which leaped by a staggering 4.3% in a single month.
However, let's not break out the champagne just yet. While February was a great month, the three-month rolling picture for construction is still fundamentally ugly. Over the three months to February 2026, total construction output actually fell by 2.0%. And what was the biggest drag over that 90-day period? You guessed it: private housing new work, which plunged by 6.5%.
What this tells us is that February represented a sharp, sudden bounce back from a deeply depressed winter for housebuilders. New work plummeted in December and January, and February saw the builders finally getting back on site to make up lost ground.
The Pre-War Ghost Economy: So, tying this all back to the macroeconomic reality we are desperately trying to navigate today. The 0.5% monthly GDP print for February is undeniably robust. It pulled the three-month rolling GDP growth up to 0.5%, well ahead of what the pessimists in the City were modeling.
But - and it is a monumental 'but' - the ONS report explicitly, and rather chillingly, states (as I did) that these figures cover the period before the beginning of the conflict in Iran on Saturday, 28th February.
This GDP print is a snapshot of a ghost economy. It shows us a UK that was finally finding its footing, shaking off the winter lethargy, and experiencing broad-based growth across services, production, and even a sharp monthly rebound in housebuilding. It is a glimpse into the spring 2026 we should have had.
Next month’s data, which will capture the March reality of closed shipping lanes, spiking wholesale energy prices, and the sudden realization that the Bank of England is going to have to keep interest rates higher for longer to fight off renewed inflation, is going to look profoundly different. Enjoy this 0.5% print for what it is: a very nice, completely outdated piece of history. Sorry.
The BRC retail sales monitor then - been some months since we’ve had room to look at this. Easter changes some of the statistics and report releases, so we’ve been handed that opportunity. Next up on the macro docket, we have the British Retail Consortium (BRC) Retail Sales Monitor for March, which dropped in the early hours of Tuesday morning. And at first glance, the headline number looks like a phenomenal, gravity-defying triumph for the UK high street.
Let’s look at the actual figures. The consensus among the City economists was a very modest 0.9% year-on-year growth. The forecast nudged it slightly higher to 1.0%. What did we actually get? A whopping 3.1%. That is an enormous upside surprise, smashing expectations out of the park and leaving the previous month’s sluggish 0.7% print firmly in the dust. On paper, the UK consumer looks like an absolute powerhouse, shrugging off the geopolitical gloom and spending with wild abandon.
But, as regular readers will know, we don't just read the headlines here; we read the implications. And the implication of this 3.1% print is heavily disguised by the ugly spectre of inflation.
We must remember exactly what the BRC Retail Sales Monitor actually measures. It measures the value of retail sales, not the volume. It tracks the amount of money going into the tills, not the number of items going out the door in carrier bags.
March was the month the geopolitical shockwaves from the Middle East really started to hit the real economy. Wholesale energy prices spiked, transport costs surged, and retailers immediately began passing those inflated costs onto the consumer. So, when we see retail sales jump by 3.1%, we have to ask the critical question: are people actually buying 3.1% more stuff, or are they just paying 3.1% more for the exact same basket of goods? The smart money is overwhelmingly on the latter. It is the inflation illusion in full effect.
Furthermore, we had Easter landing on April 5th this year, meaning the vast majority of the Easter grocery and retail run-up was captured perfectly in this March data. Combine the holiday grocery spike with the sudden inflationary surge on the shelves, and that 3.1% starts to look a lot less like a booming consumer and a lot more like a trapped one.
For the property market, the takeaway is strictly monetary. Andrew Bailey and the Monetary Policy Committee do not like upside surprises in consumer spending, especially when inflation is already creeping back up. A hot retail print, even an inflation-driven one, gives the Bank of England absolutely zero political or economic cover to even think about cutting the base rate. It cements the 'higher for longer' mortgage reality we are currently suffering through, ensuring that SWAP rates remain stubbornly elevated and buyers remain pinned down by 5.4% mortgage products. A superficial win for the high street, but another nail in the coffin for near-term rate cuts.
Alright, let's cracko on with the macro with a look at the latest Buy-to-Let (BTL) data, directly from the horse's mouth.
And so we arrive at the final major data drop of the week, the UK Finance Buy-to-Let Mortgage Market Update for Q4 2025. This is the report that gives us the unvarnished truth about what landlords are actually doing with their money and their debt, rather than what the sentiment surveys think they are doing.
Let's look at the headline numbers. In Q4 2025, there were 59,489 new buy-to-let loans advanced in the UK. This translates to a total lending value of £11.2 billion for the quarter.
Now, context is key here. This is a significant jump compared to the same quarter in 2024. We are looking at an 18.2% increase by volume (number of loans) and a chunky 21.3% increase by value. On the surface, that looks like a booming sector. A casual observer might look at that £11.2 billion and conclude that the great landlord exodus has been vastly overstated and that investors are piling back into the market.
However, as always, the devil is entirely in the details. You know that by now!
Where is that 18.2% growth actually coming from? The UK Finance data is very clear: this growth was largely concentrated in remortgage activity.
This isn't an influx of new landlords aggressively acquiring fresh stock; this is existing landlords facing the cold, hard reality of the interest rate cycle. We have 1.46 million BTL fixed-rate mortgages outstanding (up 2% year-on-year), and a vast chunk of those are reaching the end of their cheap, sub-2% fixed terms. Landlords have no choice but to refinance, often onto significantly higher rates.
Interestingly, we are seeing a shift away from variable rates, which is a defensive move. The number of variable rate loans outstanding fell by a further 9.8% to 466,000. Landlords are locking in, even at these elevated levels, to protect against further macroeconomic volatility. They’d waited long enough - or, they finally started reading the Supplement?
Speaking of elevated levels, let's look at the cost of capital. The average interest rate across all new buy-to-let loans in Q4 2025 was 4.77%.
This is actually a very interesting number. It's 8 basis points lower than the previous quarter and a full 32 basis points lower than Q4 2024. We were seeing a slight softening in borrowing costs at the tail end of last year, a trend that, as we discussed in Trumpwatch, is currently being violently reversed by the geopolitical situation in the Middle East.
This slight dip in interest rates at the end of 2025, combined with robust rental inflation, has provided a noticeable boost to landlord profitability metrics. The average gross buy-to-let rental yield ticked up to 7.18% in Q4 2025 (compared to 6.99% a year prior). More importantly, the average Interest Cover Ratio (ICR) - the critical metric lenders use to assess affordability - rebounded to 218%, up from 201% in Q4 2024. The rental market is tight, and landlords are successfully passing on higher finance costs to tenants.
But it isn't all plain sailing. While the aggregate numbers look reasonably resilient, the stress in the system is palpable if you know where to look. There were 770 buy-to-let mortgage possessions taken in Q4 2025. This is up 10% from the 700 possessions we saw in the same quarter of the previous year. This is just slow-moving data though, because possessions take many months and years. This is still 2023 stress in the system. We also need to keep an eye on arrears. At the end of Q4 2025, there were 9,520 buy-to-let mortgages in arrears greater than 2.5% of the outstanding balance. Now, while this is actually down considerably (by 910, nearly 10%) from the previous quarter, there remains a significant number of landlords who are fundamentally underwater on their cash flow.
So, what does the Q4 2025 UK Finance update tell us? It tells us that the professionalisation of the BTL sector is continuing. The "dinner party landlords" who relied on capital appreciation to mask poor yields are either exiting the market or being forcibly removed via arrears and possessions. The landlords who remain are actively managing their debt profiles, locking in fixed rates, and pushing yields up to ensure their ICRs remain viable. The £11.2 billion in lending isn't necessarily a sign of aggressive expansion; it’s a sign of a sector re-financing and digging in for a protracted period of higher borrowing costs.
With the recent spikes in wholesale energy prices and the shifting rhetoric from the Bank of England, the Q1 2026 data is going to be a fascinating read. But for now, the professional landlord is bruised, but holding the line, and we need to wait another three months for that Q1 data.
Last up in the macro section - the gilts and swaps. A calmer week, as the markets decided to interpret the US Naval blockade in the way that they have - (oil closing down roughly 10%). Thursday saw a spike in yields, Friday saw a move of double the magnitude in the opposite direction. We opened at 4.39% yield and closed at 4.246%, nearly 0.15% down on the week.
The 30-year opened at 5.521% and took a much smaller dip to 5.493%, so the yield curve is a fair bit steeper for the week. The swaps for the 5-year closed the week just above 3.94%, so they managed to come back under the 4% mark. The high for the last month (and indeed for the last year, for that matter) has been 4.29%. In mid-2023, that number was 5.3% - so, once again, some context for recent precedents. There have been many forays around the 4% level, with the most recent being in March/April 2025.
Rates are still higher, but the current situation remains “annoying but manageable”.
Into the deep dive, and there are, as usual, some interesting reports this week. First up, UK Finance report on what global tensions mean for your mortgage - worth the Propenomix treatment. Then, the IFS asks “Who Benefits From Help to Buy Schemes” - and I feel that the reintroduction of a help to buy style policy is still on the table for this year’s budget (it’s one of the only ways the Labour Government can get anywhere near their fantastical housebuilding target). Then we have a Shelter briefing which is a “Roadmap to the future of council homes”. Last up the Purposeful Finance Commission report on what it would take to deliver social and affordable housing at scale in the UK.
UK Finance on geopolitics and mortgages, then:
Theme 1: The Wholesale Funding Squeeze and Rising Rates
The Summary: The recent UK Finance report by James Tatch outlines the severe challenges currently facing the mortgage market in April 2026. As the conflict in the Middle East continues, global financial markets have experienced significant turmoil, largely driven by impacts on the global oil supply. Consequently, lenders are facing elevated and volatile costs for wholesale funding, which they heavily rely upon for mortgage lending. This dynamic has immediately pushed up the pricing for new mortgages. Just before the conflict began in late February, the average new five-year fixed rate was 5.29 per cent, but it has since climbed rapidly to 5.82 per cent. With total mortgage debt sitting at over £1.6 trillion, this represents a substantial financial burden on households navigating an uncertain housing market. Money markets are expected to remain volatile for as long as the international situation persists.
The Propenomix Perspective: Let us cut through the noise - UK Finance is stating the obvious here, but the mechanics are what truly matter. When geopolitical risk spikes, oil follows, which in turn drags up gilt yields and SONIA swap rates. We have seen this film before. Lenders are notoriously quick to pass on wholesale costs to protect their margins, leaving the retail consumer to bear the immediate brunt. However, do not let the headline jump to nearly 6 per cent panic you into making rash portfolio decisions. This is a natural market correction to perceived global risk, not a fundamental domestic failure. I always tell investors to watch the underlying swap rates, not just the retail mortgage pricing. If the oil supply shock stabilises, wholesale markets will price the risk out just as rapidly as they priced it in. The smart money does not lock in a five-year fix at the peak of a geopolitical panic - it rides the wave and waits for the swap rates to cool. It might take 3-6 months for oil prices to return to where they were, but there are 10 6-month and 20 3-month periods that make up a 5-year swap/gilt.
Theme 2: A Tale of Two Vintages - The Payment Shock Reality
The Summary: In 2026, approximately 1.8 million customers with fixed-rate mortgages are due to reach the end of their deal periods. The report highlights that this is not a homogeneous group, with the largest tranches originating in 2021 and 2024. The pricing environment during these two periods was vastly different. Customers from the 2021 vintage secured their deals when the Bank rate was just 0.1 per cent, leading to an average current interest rate of 2.35 per cent. Conversely, the 2024 cohort entered a market where the Bank Rate started at 5.25 per cent, resulting in an average rate of 4.87 per cent. When refinancing today, the 2024 borrowers face a modest monthly interest increase of £37. In stark contrast, those refinancing from 2021 deals face a significant payment shock of £395 per month. However, even with this sharp increase, the 2021 cohort will still pay £184 less per month in interest than the 2024 group.
The Propenomix Perspective: Here is where the data gets genuinely fascinating - and where the mainstream media narrative completely misses the mark. A £395 monthly jump sounds absolutely terrifying on the front pages, but context is everything in property economics. The 2021 cohort locked in the absolute cheapest money in the history of the Bank of England. They have enjoyed half a decade of virtually free leverage. The fact that their newly adjusted monthly interest is still structurally lower than someone who bought a house just two years ago in 2024 tells you everything you need to know about the power of timing the market. The payment shock is very real, but it is a shock from an artificial floor, not a leap into the abyss. As property investors, we should be looking at the rental yields and capital growth banked during that cheap five-year run, rather than crying over a return to historical borrowing norms.
Theme 3: Stress Tests and The Wage Growth Buffer
The Summary: Despite the external shocks of the cost-of-living crisis and the Truss administration's mini-budget, the mortgage sector remains highly resilient due to robust affordability checks. Lenders utilise interest rate stress tests, which were enshrined in the FCA's responsible lending rules in 2014, to ensure borrowers can absorb payment shocks. The data reveals that 94 per cent of borrowers refinancing in 2026 will secure rates lower than their original stress-tested threshold. Only 15 per cent of the 2021 cohort will exceed their initial stress rate, while a mere one per cent of the 2024 cohort will do so. Furthermore, nominal wage growth acts as a significant offset. Between January 2021 and December 2025, the economy experienced average earnings growth of 29 per cent. For an average 2021 borrower, this equates to roughly £1,000 extra in monthly take-home pay, meaning the real-terms payment shock is considerably lower than the nominal figures suggest.
The Propenomix Perspective: I have been banging the drum on this for ages - the 2014 FCA affordability rules actually worked. We regulated and stress-tested the market to within an inch of its life, and now we are reaping the systemic benefits. The doom-mongers predicting a tsunami of repossessions conveniently ignore the fact that 94 per cent of people are refinancing well within their original affordability buffers. Let us also address the elephant in the room - that massive 29 per cent wage inflation. While your purchasing power might feel pinched when paying for groceries, nominal wage growth fundamentally erodes the true burden of nominal debt. That £1,000 extra in the monthly pay packet completely swallows the £395 mortgage increase for the average borrower. The real issue is not the mass market collapsing under the weight of expensive debt. The property market remains remarkably robust precisely because inflation does the heavy lifting for leveraged asset owners. EVERY leveraged asset owner has benefited significantly from the inflation in recent years in this department (even if they’ve lost elsewhere!)
Theme 4: Forbearance and Industry Preparedness
The Summary: The report acknowledges that while the majority of borrowers are in a strong position, a small minority will struggle with the additional payment burdens. Individual circumstances vary, and not all households have experienced wage growth sufficient to offset rising bills and mortgage costs. For these vulnerable customers, exceeding the stress rate does not automatically spell disaster. The mortgage industry is well prepared to assist those facing financial difficulty until market volatility subsides. Lenders offer a range of forbearance options and tools to help manage the transition. The report strongly advises that customers do not wait until they fall behind on payments; initiating an early conversation with their lender will help determine the best available options and prevent arrears. Overall, the regulatory framework is deemed to be functioning well to protect consumers.
The Propenomix Perspective: Let me be clear - no one wants to see households lose their homes, but the sheer panic surrounding this minority of borrowers is often overblown by commentators looking for a headline. The banking sector of 2026 is fundamentally different from the reckless lenders of 2008. Lenders do not want the keys back - repossessions are incredibly expensive, capital-intensive, and terrible for public relations. Therefore, forbearance is the name of the game. If a borrower picks up the phone early, banks will bend over backwards with term extensions or temporary interest-only switches to keep that loan performing on paper. As an investor, you must pay close attention to this dynamic. Widespread forbearance keeps distressed stock off the open market, severely limiting the amount of cheap inventory that opportunistic buyers usually prey upon during a downturn. It effectively creates an artificial floor on house prices. So, do not sit around waiting for a crash driven by forced sales - the banks are actively engineering the market to ensure it never happens.
Next up, we look at the IFS report on help-to-buy and who benefits:
Theme 1: The Illusion of the Deposit Constraint
The Summary: This new report from the Institute for Fiscal Studies examines the true impact of the UK government's Help to Buy schemes on housing affordability. The research reveals that most non-homeowners in the early 2010s were fundamentally restricted by income limits rather than their ability to save a deposit. Because buyers were primarily constrained by standard loan-to-income multiples - typically capped at 4.5 times their salary - lowering the deposit requirement via the mortgage guarantee scheme had a negligible effect on overall affordability for the majority of aspiring buyers. The data demonstrates that simply reducing the cash an individual must put down does not magically allow them to borrow more money against a low income. Consequently, the mortgage guarantee scheme only produced meaningful changes in purchasing power for those in the highest income brackets, who were genuinely deposit-constrained.
The Propenomix Perspective: I have been banging this drum for years, and it is mildly refreshing to see the IFS finally put the data behind what any active property investor already knows. Politicians love to fixate on the deposit hurdle because it makes for an easy, palatable soundbite on the evening news, but the real silent killer in the UK property market is - and always has been - the hard ceiling of wage stagnation clashing with loan-to-income caps. When SONIA swap rates are volatile and lenders are inherently cautious, offering a 5% deposit guarantee is like handing a plaster to a patient with a severed limb. It simply does not address the underlying reality that typical wages cannot support the borrowing required at current valuations. By ignoring the income multiplier constraint, the government spent a fortune trying to solve the wrong mathematical problem.
Theme 2: The High-Earner Subsidy
The Summary: The IFS study indicates that the equity loan component of Help to Buy, which provided government loans of up to 20% on new-build homes, delivered its most significant affordability gains to individuals who already possessed higher incomes. Furthermore, the scheme generated the largest increases in maximum affordable purchase prices for those residing in London and the South East. The authors conclude that Help to Buy did not succeed in boosting social mobility or mitigating housing inequalities rooted in parental background. Instead of rescuing the less well-off, the scheme likely just accelerated the homeownership timeline for affluent individuals by a few years, rather than acting as the decisive factor in whether they could ever purchase a property in the longer term. Ultimately, both schemes effectively required the government to assume financial risks that the private sector was unwilling to take.
The Propenomix Perspective: So, the grand flagship policy designed to get the struggling working classes onto the housing ladder actually just acted as a taxpayer-funded accelerant for high-earners in the South East. Who could have possibly seen that coming? I find it genuinely staggering that we poured billions into an equity loan scheme that essentially subsidised those who would have bought anyway. From a purely macroeconomic standpoint, pumping demand-side stimulus into a constrained market without addressing the supply side is economic illiteracy. Lenders knew exactly what they were doing by letting the taxpayer underwrite the riskiest slice of the capital stack while they collected the interest. As an investor, you have to laugh at the grim irony - the scheme created an artificial floor under developer margins while doing precisely nothing for structural affordability. It was a stealth bailout disguised as a leg-up for the squeezed middle.
Theme 3: Geography and the Supply Side Failure
The Summary: According to the IFS analysis, local housing market characteristics and regional income variations were far more critical to housing affordability than individual deposit capacities. The geographic distribution of local house prices fundamentally dictated the share of properties a non-homeowner could afford, regardless of their savings. Additionally, because the equity loan scheme was exclusively restricted to new-build properties, its real-world impact was heavily muted in areas suffering from a low share of available new-build homes. The researchers highlight that any scheme functioning to subsidise purchases can inherently raise the prices developers are able to charge. Consequently, while such demand-side interventions might help specific target groups afford a home, they do so at the direct expense of other buyers competing in the exact same market, who subsequently face higher general house prices.
The Propenomix Perspective: Here we arrive at the absolute crux of the UK's property dysfunction. You simply cannot fix a supply-side crisis with a demand-side chequebook. By restricting the most potent part of Help to Buy exclusively to new-builds, the government effectively allowed the major developers to capture the subsidy via the infamous "new-build premium". If you are looking at where the capital actually flowed, it went straight into the land banks and profit margins of the volume housebuilders. We have a planning system that belongs in the dark ages - severely limiting where and how we can build - and yet we consistently try to paper over the cracks by throwing cheap debt at buyers in highly localised, overheated markets. Unless we take a chainsaw to the planning regulations and address the physical scarcity of bricks and mortar, any future iteration of these schemes will just be another expensive treadmill of asset inflation.
Next up - Shelter’s briefing and their vision of a council housing revolution:
Theme 1: The Social Housing Deficit and Historical Precedent
The Summary: With homelessness reaching record levels, it is widely recognised that England needs to construct 90,000 social rent homes annually for a decade to address the current housing emergency. This target stands in stark contrast to recent delivery metrics; over the past five years, English councils have delivered an average of just over 2,200 social rent homes per year combined. The disparity is pressing, particularly given that over 175,000 children are currently housed in temporary accommodation. Historically, local authorities were capable of operating at this scale, delivering an average of over 120,000 social homes a year during the 1960s. To bridge the current gap, recent analysis suggests that, with appropriate powers and support, councils could scale up to provide 34,000 of the required 90,000 annual social rent homes through a combination of new builds and acquisitions.
The Propenomix Perspective: It is very easy for think tanks to point to the 1960s as a golden era of municipal building, but we are operating in a completely different economic universe today. Back then, we did not have the labyrinthine planning system or the severe labour shortages that currently choke the UK construction sector. The idea that local authorities can just flick a switch and ramp up from a couple of thousand to 34,000 units a year is mathematically heroic, to put it mildly. We have a fundamental capacity issue in the industry. While the temporary accommodation bill is indeed a spectacular drain on the public purse, throwing arbitrary targets into the ether does not magically produce bricklayers or bypass the reality of current material inflation. Building 90,000 units requires a colossal capital mobilisation that goes far beyond simply asking councils to step up and perform miracles.
Theme 2: Housing Revenue Account (HRA) Debt and Fiscal Restraints
The Summary: A significant barrier to new development is the historic debt sitting in councils' Housing Revenue Accounts (HRA). When the HRA moved to a self-financing model in 2012, councils assumed £29bn of historic debt, which is largely owed to the Public Works Loan Board (PWLB). Repaying the interest on this debt consumes funds that could otherwise be invested in new housing. Furthermore, Treasury fiscal rules currently treat council borrowing as a cost to the national balance sheet, rather than an infrastructure investment. Councils have recently been excluded from bidding for a £2.5bn pool of ultra-low interest loans (0.1%) made available to housing associations, placing local authorities at a severe financing disadvantage. Advocates propose that the government must unlock low-cost financing for local authorities and reform debt accounting measures to exclude revenue-generating infrastructure.
The Propenomix Perspective: This is where the Treasury's left hand genuinely has no idea what the right hand is doing. Loading £29 billion of historic debt onto councils and then acting surprised when they cannot afford to build is a masterclass in Whitehall absurdity. If we look at the mechanics, councils borrowing at standard PWLB margins - while housing associations get access to ultra-low 0.1% loans - creates a completely skewed market. I have always argued that infrastructure and housing should be treated differently on the national balance sheet, much like they are in most OECD nations. But until the Treasury stops treating revenue-generating assets as toxic liabilities, local authorities will remain financially straightjacketed. You simply cannot service legacy debt at elevated SONIA swap rates while simultaneously funding heavy capital expenditure for new builds. The maths fails before the first spade even hits the ground.
Theme 3: Compulsory Purchase and the Eradication of 'Hope Value'
The Summary: The Levelling Up and Regeneration Act 2023 introduced reforms allowing public bodies to utilise Compulsory Purchase Orders (CPOs) without having to pay 'hope value'. This legislative change means councils can acquire land without compensating the owner for the speculative increase in value it might achieve if sold for high-end private development. Historically, CPOs were a critical tool for councils during the post-war construction boom to secure land at financially viable prices. Modelling indicates that disapplying hope value could lower land acquisition costs by approximately 15%, potentially yielding an extra 4,000 council homes annually. However, despite these new powers existing, there is currently no evidence of councils utilising them, likely due to fears of protracted legal challenges. To counter this hesitancy, reports urge the central government to provide subsidised legal advice and liability insurance to embolden local authorities.
The Propenomix Perspective: Writing a new law to bypass 'hope value' looks fantastic on a parliamentary briefing note, but it is an absolute minefield in the real world. Landowners are not going to simply roll over and accept agricultural use-values when their sites clearly have developmental potential. If a council issues a CPO under these new rules, the landowner will litigate. They will drag the local authority through the courts for years. Most councils are terrified of this prospect, which is precisely why these powers are sitting on the shelf gathering dust. The central government offering to underwrite the legal fees is a nice gesture, but it completely ignores the time value of money and the extensive delays inherent in the UK legal system. A 15% discount on land is virtually meaningless if it takes you five years of courtroom battles to actually secure the title. The market dictates price, and legislating against market forces usually ends in a costly stalemate.
Theme 4: Repurposing the Existing Stock
The Summary: In addition to new construction, there is a push for councils to acquire existing properties - particularly long-term empty homes - to convert into social rent. During the late 1970s, English councils purchased up to 14,000 properties annually for this purpose. By contrast, over the past five years, they have acquired a combined total of just 898 homes per year on average. Scaling up these acquisition strategies could reportedly deliver 22,600 new social rent homes over five years across both urban and rural settings. Although grant funding through the Social and Affordable Homes Programme is available for converting empty homes, there are demands for a dedicated long-term empty homes programme backed by specific funding to ensure local authorities can bring these properties back into use.
The Propenomix Perspective: Let us be brutally honest here - buying existing stock does absolutely nothing for net housing supply. It simply shifts property from the private sector to the public sector. Yes, it might marginally reduce the eye-watering £2.8 billion temporary accommodation bill in the short run, but it does not fix the underlying structural deficit of homes in the UK. Furthermore, acquiring long-term empty homes sounds noble until you look at the capital expenditure required to bring them up to modern compliance standards. Local authorities will be inheriting a maintenance nightmare, particularly with the looming EPC targets. Retrofitting a dilapidated Victorian terrace is often more complex and expensive than building from scratch. So, while a dedicated acquisition programme might provide a quick political win and house some families faster, it is a sticking plaster over a gaping wound. We need raw, net-new supply, not just a game of municipal musical chairs.
Last up - Mind the Viability Gap. A report from the Purposeful Finance Commission.
Theme 1: The Widening Viability Gap in Social Housing
The Summary: Over 1.3 million households are currently on a social housing waiting list across England. The demand for social and affordable housing meaningfully outstrips supply, creating a systemic issue. A primary driver of this failure is a widening viability gap, where the cost of building homes can exceed their completed value, even once subsidies are applied. Build, land, and regulatory costs have risen by around 17% since 2022, whilst sales prices have grown by only 1%. Because social rents sit considerably below open market values, an inherent reliance on grant funding and cross-subsidy is required. In London, providers are reporting subsidy gaps of around 60% on new family homes. Compounding the issue, elevated interest rates have increased the cost of borrowing used to bridge the gap between grant allocations and total scheme costs.
The Propenomix Perspective: The PFC states the obvious here - development is a numbers game, and right now, the numbers are completely broken. You cannot expect private enterprise to cross-subsidise a 60% void on a family home in the capital whilst debt costs hover where they currently do. We are looking at a market where SONIA swap rates have punished highly leveraged housing associations, and gilt yields dictate that risk-free returns often look far more attractive than laying bricks for a negative margin. The report points to high build costs, but let us be brutally honest - this is a structural failure born from the withdrawal of cheap money. The social housing model spent a decade relying on low-interest debt and rising open-market sales to pay for affordable units. Now the tide has gone out, and the viability gap is laid bare. Without serious, structural capital injections that understand current debt markets, these homes simply will not get built.
Theme 2: Regulatory Fragmentation and Delay
The Summary: The delivery of social housing is severely hindered by a fragmented regulatory landscape, which absorbs high regulatory costs and delays at almost every stage of development. The PFC notes that regulatory responsibilities are distributed across twelve separate bodies with no coordinating authority. Developers face compounded hurdles from planning authorities, the Building Safety Regulator, and environmental bodies, none of which have a shared statutory mandate to deliver housing. For example, the Building Safety Act 2022 introduced strict gateway approvals that have created long backlogs and high holding costs. To combat this, the PFC recommends designating a Single Construction Regulator to provide regulatory oversight across all strands of housing development. This regulator would streamline interfaces between planning, building safety, and infrastructure bodies to shorten timelines.
The Propenomix Perspective: Regulation is the silent killer of yield, and the fragmented mess described here is exactly why institutional capital is looking at UK housing and politely declining. It is madness that a viable site can be held hostage by twelve uncoordinated bodies. You have ecological authorities bleating about biodiversity credits whilst Ofwat cannot figure out how to connect a wastewater pipe, and all the while, the developer's holding costs are compounding at 8% or 9% per annum. The Building Safety Act was necessary, yes, but the bureaucratic paralysis at Gateways 2 and 3 is an absolute masterclass in how to stall regeneration. The proposed Single Construction Regulator sounds like a nice bureaucratic plaster, but unless it comes with a mandate to override local councils and penalise statutory consultees for delays, it will just be another layer of red tape. Time is money, and right now, the state is making time very expensive.
Theme 3: The Collapse of the Section 106 Model
The Summary: Reliance on Section 106 agreements is showing severe strain, despite funding 44% of new affordable homes in 2023-24. As of October 2024, 17,432 affordable homes with planning permission remained stalled because there was no housing association willing to purchase them. This lack of financial capacity is directly linked to housing association budgets being diverted towards remediation, retrofitting, and regulatory compliance. Furthermore, the current Homes England system does not provide funding for estate renewal projects, offering no financial incentive to renovate existing, poor-condition homes. The report recommends a transition to a more predictable funding mechanism via the National Housing Bank. It also suggests formalising an intermediate flexi-tenure model where rents are linked to household income within clearly defined caps and floors.
The Propenomix Perspective: If you want to see the real-world impact of constrained capital, look no further than the collapse of the Section 106 model. We have over 17,000 consented homes sitting idle because housing associations are functionally broke. They are pouring their liquidity into cladding remediation and net-zero vanity projects instead of buying stock. The idea that private housebuilders should carry the can for the state's social housing obligations was always a bull-market luxury. When margins get squeezed, the cross-subsidy model shatters. The suggestion of an income-linked flexi-tenure model is intriguing, but let us see how debt markets price that variability. If the incoming cash flows are not robust enough to satisfy the covenants of institutional lenders, it is dead on arrival. The National Housing Bank needs to act like a real liquidity provider, not just a repackaged grant distributor, if it wants to restart this stalled engine.
Theme 4: Land Scarcity and Infrastructure Bottlenecks
The Summary: The supply of viable land in high-need areas remains a critical barrier to housing delivery. While estimates suggest brownfield land in England could accommodate at least 1.41 million homes, industry experts note that the easy sites have already been done. Remaining consented sites are frequently constrained by contamination, infrastructure deficits, and high acquisition costs. Compounding this, water scarcity and wastewater infrastructure delays are currently stalling around 30,000 homes. The PFC recommends reviewing underused Strategic Industrial Locations to potentially unlock 328 hectares of well-connected land in London for residential development. The report also calls for strengthening Compulsory Purchase Orders (CPOs) to allow local authorities to acquire stalled land closer to its existing use value.
The Propenomix Perspective: Land banking is the classic political bogeyman, but the reality is far more tedious. The remaining brownfield sites are absolute dogs - contaminated, disjointed, and devoid of the necessary grid or water connections. You cannot build a financial model when water companies have the power to halt your site indefinitely because they have not updated their Victorian pipework. The suggestion to strip away Strategic Industrial Locations in London is one of the few genuinely supply-side solutions in this report that actually excites me. We have acres of low-density sheds sitting on prime land whilst families rot in temporary accommodation. However, the push for aggressive Compulsory Purchase Orders at existing-use value is fraught with legal peril. Landowners will litigate, delaying projects further. Unless the government is prepared to underwrite the infrastructure costs to make these marginal sites viable, simply shifting the ownership via CPO will not put a single spade in the ground.
As we get towards the end for this week - our Manchester Property Business workshop is next week. This is a workshop in huge demand, as we talk about exits. We cover tax, risk, deal structuring and exit options - not just for you, but for those who you will inevitably be dealing with to buy assets, portfolios, companies and the likes from. Can you help with their exit? I have, over the years, often because they have no real formal plan of their own - and added massive value, getting deals over the line. Have you got children or are you planning to leave a legacy? What does your plan look like? Do the kids know about it…….they often don’t, and - spoiler alert - they often don’t want to play ball either!
As always we have real life case studies about our own experiences, and close with our “no-holds-barred” Q+A. Our VIP dinner is now sold out, but it isn’t too late to get a ticket for the workshop. Book your tickets for Wednesday 22nd April, Central Manchester at: www.tinyurl.com/pbwten
Above all - please remember to Keep Calm, ALWAYS listen to or read the Supplement, and Carry On. There will be opportunities abound this year and towards 2030 and beyond - the landscape has been set for a surefire bull run. Capital growth looks set to remain slow(ish) at the moment, although if you are in the right part of the UK, you will be well looked after by the combination of that plus inflation, the big bull run needs some runway first (although let’s see what the FCA and PRA do around easing lending requirements again) - but let’s finish our super Golden Quarter together - it is a case of “here we go” in my opinion. The fundamentals haven’t changed - there’s a shortage of 2-3 bed terraces and semis, there was 15 years ago and it has only got worse since then. “Investing in property” is not a guaranteed win. Investing in undervalued areas, sexy on the spreadsheet, strong yields - that’s as close to a guarantee as you will get in any game, which will also ensure you keep pace and indeed stay ahead of inflation. KCCO!