"Only when the tide goes out do you discover who's been swimming naked." Warren Buffett.
This week’s quote pertains to the deep dive, as ever, as we get stuck into a number of reports including an update on the MFS administration situation.
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
Trumponomics - Impossible to avoid a further Iran update. What changed this week? Well, there were violent moves upwards in the oil price on Friday, percentage movements upwards of over 10%, as the full effect on the region (not just Iran spraying missiles around relatively indiscriminately at US/Israel allies before they get destroyed/bombed out of existence) was felt. The Strait of Hormuz is effectively closed anyway, because of insurance risks and unwillingness to pass through the region (remember, 20% of the world’s oil passes through this).
On Friday, both Iraq and Qatar announced production cuts because their storage facilities are full - other producers in the region are days or weeks away from this happening to them. The US sank an Iranian warship and on the other hand, announced $20bn worth of insurance for the area to (try) and keep the necessary flowing out of the region. Fast action, nimble, will it work? We will see.
Oil is up 40% this month as I write this, a week or so in. Gas is up 60%. That’s the real cost on the ground. Whether the climate has been taken into account or not in terms of timing here - no idea, but it is probably the “best” timing if this action was indeed inevitable. Is this Netanyahu’s true pound of flesh for October 7th 2023? It’s a matter of speculation, of course.
Will the $20bn work? Most will value their lives above commercial incentives. Not all. “Danger money” is a thing, after all, folks. A few will run the gauntlet but it won’t keep the machine moving, is what most of the commentators seem to think. Sounds sensible enough.
The last question has to be - what might we be missing whilst distracted (to say the least) by this conflict? (The next question, of course, is how deliberate is the timing of all of this). Quietly, some tech and AI stocks have shed significant numbers from (relatively) recent highs, whilst utility companies (because power is the future) have been being bid up. I would presume M&A activity in the space is going to increase, because the tech bros will be buying these utility companies - for control purposes, if nothing else - because they will be such a key part of their supply chain when it comes to data centres, so pre-emptive speculative activity is inevitable when investors sniff an acquisition which is likely to be hotly contested.
There was a huge shakeup in US Homeland Security with the removal of the Secretary for Homeland Security, who was “reassigned”. The FTSE has stayed relatively robust thus far this month - down about 1%, compared to the rest of the developed world’s markets which are down 3% - 6%.
We hole up in the safety of the UK real-time property market. Chris Watkin’s analysis/roundup of week 8 of the UK Property Market. Chris “runs” Sunday to Sunday, so this was the week ending 1st March. We stay ahead of 2025 in listings for one more week - just about - so far (282k on the market so far is 1% above 2025 and 9% ahead of 2024, and 20% ahead of the 2017-19 average). The glut of listings is persisting - how much longer can we blame the budget for, in terms of disrupting the supply pipeline? What we know is that there’s extra stock on the market - it must be landlord disposals - but we don’t know exactly who is buying them, although first time buyers are especially active and there’s only so many houses, of course……..listings are 10% higher, week-on-week, than the historical averages (at the moment). And - remember only a little over HALF of what’s listed actually sells (unbelievably).
Gross sales are at 194k SSTC YTD, 11% higher than 2024 but 6% lower than 2025. The lack of that 31st March deadline, the urgency, and the time pressure will likely wash out by the time we get to the end of H1 of this year - because we know that last year’s figures had a peak and then a trough, as you always do around a stamp duty change/hike. The reason why pricing is sideways is because there is just so much supply, but transaction numbers still look very healthy indeed. Functional. Prices dropping in real terms (after inflation). Affordability improving. Everyone is happy (although those of us who benefit significantly from capital growth would mostly prefer it was faster, of course!).
Net sales are also 11% ahead of 2024, at 150k. 16% ahead of the 2017-19 market, and 28% ahead of 2023 which as we know was “limp lettuce” territory all year. 4% lower than 2025, though, with reference to the above caveats.
To start March there ended up being a 10-year+ record number of homes on the market (for a March, to be clear - we haven’t yet ascended or beaten the peaks set in 2025) - 682k thanks to this record Boxing day and solid January - 2025 Mar 1st saw 675k OTM, so it is 1% above that - a hair’s breadth.
Sales pipelines are, however, a few percent below where they were 12 months ago. At the end of Jan 2026 agents had 422,067 properties sold subject to contract - that compares to 433,030 at end Jan 2025, 353,395 at end Jan 2024, and 459,094 at end Jan 2021.
Reductions were back over 20k - 20.9k for the week, 12% of stock was reduced in February, compared to the 2025 average of 12.8% (and the longer average of 10.74%). The fall-through rate is nice and low at the moment; 19.9% in week 8, (longer-term average 24.2% - all far too high of course, but all numbers have to be looked at in context of the “norm”).
January ‘26 saw sales agreed averaging £340.73, Only 0.63% ahead of a year ago. However, I do wonder just how much the cheaper stock selling much more is harming this average and this is why there’s some divergence between more recent figures and the ONS. Let’s see what filters through when we get there. This number is 16% ahead of 5 years ago - January 2021 was really accelerating very fast in terms of pricing and a huge slice of that 16% happened in just one year. We will keep monitoring. Exchanged prices were well above this for the month - £348.13 per foot, which is the highest number on record. Again, is there distortion here because these were deals agreed after the 2025 budget? It wouldn’t seem so, but you know we don’t make decisions based on one month’s data, we just keep abreast of it. That as a leading indicator might suggest prices breaking some ground as we get to the middle of the year, but I’d prefer a few months of data to just the one!
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!
First week of the month, and so we get to get stuck into a Nationwide and Halifax House Price Index double-header first up. Then, the Bank of England Money and Credit Report always gets some scrutiny here. We then had the final PMIs, which I love due to their timeliness and predictive power (although they are limited to the private sector, which is why the economy has outperformed the PMI readings for the past 18 months or so - the public sector has “grown” “fine” thank you very much). We conclude the macro feast with the gilts and the swaps, as always.
For the first time since I’ve ever looked at these reports, the consensus (read - average of the guesswork) was actually dead right for both Nationwide and Halifax. They (you know them - the experts) guessed 0.3% for both, and both printed 0.3%. Nationwide saw that as 1% up over the past 12 months; badged as a “modest recovery after a dip before the budget due to tax speculation”. Not unfair. They have market transactions up 10% from 2024 to 2025, and mortgage completions up 18% year-on-year, citing improving affordability (undeniable), and easier credit availability (that story is now 12 months old).
Here’s the 419 on their rather complex graph, which - for once - is better told in words than graphically, because it is a little noisy and messy:
BTL with mortgage purchases are about where they were at the end of 2019. This is interesting, because margins have been squeezed since then - it suggests that those that are going for it are going for it (to me)!
Moves with a mortgage (not first timers) are ALSO back where they were at the end of 2019. Once again - not put off by the higher rates.
First time buyers are doing about 20% better than they were at the end of 2019. Improved affordability and easier credit? Not really easier credit. At that point they were stress tested at 5.5%, today that is 6.5%. So - next time someone tells you wages haven’t gone up, remember to pass the salt, and take more than a pinch.
Cash buyers are the steadier of all of the lines, but once again a little bit more active than they were at the end of 2019. The transaction growth is - in the vast majority - coming from the First Time Buyers, and a little bit from the cash buyers.
Buy to let activity is described as “still subdued compared to historical levels”. I think the Government would take this as a win. Is that wise? The market will tell us in future. Nationwide’s index has basically seen no increase in nominal house prices at all in the past 4 years, looking at the graphs. Depending on where you are in the country, you might vehemently disagree or even wish that you hadn’t lost money since the 2022 peak - and both of those positions are perfectly feasible. Location, location, location - but the inverse of 2009-2015, for example.
Nationwide did a whole “Housing Affordability Report” as well - guess what, affordability is stretched in London and the South East, with Scotland and the North being the most affordable. The tale of the tape - FTBs were about 45-46% of the market in terms of percentage of activity in 2015 - George Osborne’s budget singlehandedly moved that to 50% or so - that wobbled around pandemic times, for obvious reasons (uncertainty), but now sits at more like 55%. They are fighting back from the wilderness years of 2002-2015, when buy-to-let was growing rampantly.
The first time buyer house price to earnings ratio now sits at 4.7 according to the Nationwide (and the ONS) - compared to the 20-year average which sits at around 4.95x. It’s the first time below the line (it’s been below the line since late 2023) since 2013. This (like all metrics) isn’t great on its own, because it doesn’t say anything about the cost of mortgage debt - just earnings versus prices.
The past 20 years shows very limited difference in the makeup of deposits - around 35% comes from a blend of “Bank of Mum and Dad” and Inheritance (30% BoMaD and 5% inheritance, as a rule), with 65% being from savings (remember, this is an average). That doesn’t sound unreasonable (to me, anyway) and it has been sustained over the past 20 years.
Mortgage payments as a percentage of take-home pay (which of course does by definition bake the interest rate into the calculation) - notably higher than the long run average for London, which tells another tale in itself - really quite close to the long run average elsewhere. A functional market, mostly.
The North, and Scotland, both have price to earnings ratios around/below 3x when it comes to first time purchases. Just remember that the next time you hear houses are unaffordable.
If you are earning the “regional average”, you are within 5% of the mean earnings for a first time buyer everywhere apart from London, the South East, and the East (In London the average earnings for a first time buyer are still 45% above the regional average, a true outlier).
No surprises, but worth looking at - I still get several comments a week about impending house price crashes across various bits of social media, and rather than simply dismiss them all - I’d rather dismiss them with facts. There’s simply no boom to crash FROM, primarily - London is adjusting, and is continuing to do so - at some point, though, the complete lack of new supply will have an impact (remember, when it comes to regional growth, London still crushes the rest of the UK).
Halifax’s average price topped £300k, which says more about where they tend to lend more money rather than anything else, in my view. Their annual change is +1.3%. Their head of mortgages talks of gradual improvement (which plays out in their figures), and also mentions the geopolitical situation which Nationwide missed due to the timeliness of their report. The impact - slower interest rate cuts than many were expecting.
Halifax still has Northern Ireland in front on capital growth (+6.3%), with the North East at +3.5% “winning England” with the North West at +2.9% in second place. They have the South East down 2.2% in the past 12 months, and London down 1% (the exact same figure as the ONS).
They cite an improving RICS residential market survey, a steady mortgage approval volume, and a steady number of transactions. Mortgage approvals are down 9.6% January to January, but they don’t mention (so I will) that of course, as I’ve said a whole number of times, January 2025 was extra busy trying to complete before the March 31st re-introduction of Stamp Duty on homes between 125k and 250k (and lower allowances for First Time Buyers).
OK. The Bank of England Money and Credit Report, then. Mortgage approvals dropped to 60k. The number has been hovering around 65k, so in isolation, this is a significant trim. I struggle for a “fair” January comparison - Jan 2025 is likely too hot, Jan 2024 was 55,200, Jan 2023 was 39,600 (but it was Lettuce for Breakfast back then, of course), Jan 2022 was 74k (but the market was still white-hot and the world was still swimming in uber-cheap money, and rates had only just started to move). Jan 2021 saw 99k mortgage approvals (really) but we had stamp duty holidays, concertina transactions thanks to lockdown, etc. etc. Jan 2020 - ye olde world - MAYBE our best yardstick, but that was 70,900 - the highest since February 2016. Remember the “Boris bounce” - that was it. January 2019 then (last one, promise) - 66,800. So there we go. Definitely 10% or so below par - so this figure becomes one to watch. Why so low? Don’t know, is the honest answer - I wouldn’t have expected this from the Watkin figures, but this is why I go into the level of detail that I do. We never get excited (or bearish) based on one month, but this is definitely a watching brief. The Bank doesn't offer anything in terms of explanation.
Credit to individuals didn’t change markedly at all month-to-month. Corporations borrowed a decent amount, the money supply contracted compared to a big increase in December - which settled any nerves around that metric, for another month anyway. The effective interest rate paid on mortgages (new ones drawn down) got down to 4.09% in January - and the rate on the average stock of mortgages outstanding was 3.9%. Convergence is closer, but that was actually a drop from December’s 3.92% (seems that the more expensive 2 year debt rolling off means that the average has started to come back DOWN, instead of up - again, this is a “first month” phenomenon so let’s keep an eye on it rather than go mad making up clickbait titles for YouTube videos, eh?)
SMEs paid 6.14% on average in January for new loans; large companies paid 5.71%. The biggest takeaway - the 60k mortgage approvals. Are we going to see a slowdown? Let’s see what February did; a note for the diaries in a few weeks’ time.
PMI-time, then. Manufacturing first - printed 51.7 from a flash print of 52. Still - new export orders rose at the quickest pace in 4.5 years. Just remember though - it isn’t JUST oil and gas that passes through the Strait of Hormuz - so expect some disruption when we get the March reports. January’s number was 51.8, so it was actually a 2-month low, but there is no material change here. It’s four months in a row above the 50-handle, and that will be most welcome.
Tariffs were only mentioned a teeny bit, which is perhaps a surprise given that data here was collected up until 24th February. Companies are clearly keeping calm and carrying on, and doing their best.
Services, then? The biggie? 10 months in a row of growth. The print - 53.9 - once again very similar to January’s 54.0. A solid pace. Behind the curtain? Job cuts persist amid pressure on margins from rising costs, and new order growth loses momentum. Inflation (in terms of input) “little changed from January’s 5-month high”. This is, of course, BEFORE any of the geopolitical events in the Middle East and beyond.
The composite has the same 10-month winning streak, and printed 53.7, compared to the 53.9 flash print. Not bad at all. How about construction then? Yikes. Still bad. 44.5 is a slip from the January 7-month high of 46.4, and a long way adrift of the 50-handle. The big strapline? Faster decline in housing activity weights on construction sector output. Now - let’s remember. February was WET - and that won’t have helped. But this is 14 months in a row of falling construction sector activity. Residential building printed 37.0. Terminally low. Commercial construction was 46.5, and civils printed 41.
Business optimism actually improved, however - the businesses can see the other side of this slump, it seems. Input cost inflation was the highest since July 2025. Let’s see if there’s any catching up in March, assuming the clement start to the month continues……
Last week in the gilts we had a flight to Government bonds as the activity in the Middle East was obvious to many. This week we had the worst week for many months, I’m afraid, for us borrowers.
We drifted from 3.723% on the open to 4.038% yield at the close of the week for the 5 year gilts. 31.5 basis points. Ouch. 4.20% was tested on Friday, as the volatility is significant. The 30s opened at 5.075% and ended the week at 5.332%, slightly less of an increase (25.5 basis points) so the yield curve got shallower (can you see me clutching at straws, here?) That makes sense because the impact here is shorter term, of course, so it would hurt the front end of the curve more. The market opinion of an interest rate cut this month at the Bank of England meeting is down from nearly 90% to barely 20%. The markets now have just ONE cut by the end of 2026 priced at around 50-50. Thursday’s 5-year swap close was 3.725% - a hefty adjustment, but that hasn’t yet priced in Friday’s activity and further hardening in yields. Destination - possibly 4% here, possibly more.
As I’ve said consistently, for years now - slower and more gradual for longer. I’ve been berated, told off, derided, and everything in between. It isn’t about being “right”, and it isn’t about being right because of a war which I certainly didn’t predict. It’s about the probability of events that would affect the rates to the upside, versus the events that could see rates cut to the downside. If there’s “sudden peace”, all bets are off and we could be back on - seems unlikely given the US suggestion is “ultimate surrender” by Iran, which no country ever has on the table until they are quite literally completely broken, as evidenced by many recent conflicts all over the world. Rates going UP isn’t out of the question folks - so lock in whatever rates you can now - that’s the only sensible way to go.
OK. I’m opening the deep dive with a look at Market Financial Solutions, a large bridging company that has collapsed into administration with accusations of fraud in the background. What’s been said “on the street” is that this is a bit of a classic - securing loans against the same assets several times over. Not the first time and not the last, and certainly not in property. After this we will look at the Spring Statement - completely overshadowed by the geopolitical events of the past week, but I’ve found myself SOUNDING like I’m defending the Labour Party in the recent week (I’m not, I’m just setting people straight about what’s actually happening in the economy - events over which the ruling party actually has quite limited influence but still takes the blame and none of the credit for).
We have to take a separate look at the OBR Economic and Fiscal Outlook. I didn’t think, at first glance, that it was particularly good - let’s dive into that. The Bank of England also published a working paper in the past 10 days about the impact of interest rates on consumption - the thing really holding economic growth back at the moment in the UK - and so I thought that was also worth a look “in the round”.
MFS then. Thanks to Supplement readers for pointing me in this direction, because it is certainly something that needs discussion. Here’s a summary of the facts, and my take, in the deep dive format:
Theme 1: The Alleged "Double-Pledging" Fraud and Collateral Shortfall
The Facts: Market Financial Solutions (MFS), a dominant UK bridging and specialist lender with an estimated £2.4 billion loan book, collapsed into administration in late February 2026. The implosion centers on severe allegations of systemic fraud - specifically a practice known as "double-pledging." Creditors and court documents allege that MFS executives repeatedly used the exact same property assets as underlying collateral to secure multiple funding lines from different institutional backers, entirely without disclosure. When the music stopped, the numbers revealed a catastrophic black hole. Preliminary estimates from creditors suggest that against £1.16 billion in secured debts, only roughly £230 million in actual, unencumbered collateral can be verified. This represents an 80% shortfall, leaving nearly £930 million effectively missing. Barclays initiated the freeze on MFS accounts in January 2026. Following this, the board of directors resigned en masse, and the CEO/Founder, Paresh Raja, has reportedly fled the jurisdiction to Dubai, leaving administrators from AlixPartners to untangle the wreckage.
The Propenomix Take: I have spoken before about the dangers of unchecked, rapid scaling in the specialist lending space, and here is the explosive consequence. This isn’t just a procedural error; if the allegations hold, it is a catastrophic failure of basic due diligence at an institutional level. The Propenomix view is that "frothy" markets breed exactly this kind of opacity. When money flows too easily from yield-hungry private equity, the boring, necessary checks on collateral registries get ignored in favour of growth metrics. For property investors, the takeaway is brutal but necessary: do not assume your lender is too big to fail or fundamentally solvent just because they are heavily backed. The structural fault line of complex, over-leveraged debt isn't just a risk for the borrower; it’s a massive counterparty risk. When the foundation is built on phantom collateral, the collapse is sudden and total. Expect severe regulatory blowback to fundamentally alter how specialist lenders report their loan books going forward.
Theme 2: Institutional Exposure and the Private Credit Bubble
The Facts: The fallout from MFS extends far beyond the UK residential property sector, directly implicating major players in global finance. MFS was heavily bankrolled by the $1.7 trillion shadow banking sector - specifically, private credit and private equity. The list of exposed institutions reads like a Wall Street directory. Barclays is reportedly facing the heaviest blow, with an estimated £600 million exposure. Other major players caught in the crossfire include Apollo Global Management, Elliott Management, Santander, and Wells Fargo. These entities provided the massive wholesale funding lines that allowed MFS to scale aggressively. The MFS collapse mirrors recent distress signals in the broader private credit market, such as the blowups of First Brands and Tricolor in the US. The administration process has triggered emergency audits within these institutional heavyweights, as risk committees scramble to understand how traditional safeguards failed to detect the double-pledging of assets across multiple tranches of private debt.
The Propenomix Take: This is the "bubble" warning I’ve been tracking for months, finally bursting onto the front pages. Post-2008 regulations pushed risky lending out of traditional banks and into private credit. These institutions chased yield in a low-rate decade, piling into complex property debt vehicles without maintaining rigorous underwriting standards. The Propenomix perspective is that MFS is a symptom, not an isolated disease. When Apollo and Barclays get burned for hundreds of millions on basic collateral checks, it exposes the sheer hubris within the private credit bubble. This is the "mild zombie apocalypse" scaling up to the institutional level. The immediate consequence will be a violent snapback in risk appetite. Private equity will pull the plug on marginal lenders, and those relying on wholesale funding lines are going to face existential liquidity crunches. The era of cheap, lightly scrutinized institutional capital flooding the UK bridging market has abruptly ended.
Theme 3: Contagion and the Rise of the "Zombie Borrower"
The Facts: On the ground in the UK, the MFS administration has triggered an immediate liquidity freeze for thousands of developers and investors. AlixPartners, acting as the administrators, are legally bound to recover maximum value for creditors, effectively turning MFS from a dynamic lender into a pure debt-collection vehicle. Borrowers currently mid-term on MFS bridging loans are unable to draw down further tranches of agreed funding, halting development projects instantly. More critically, those approaching the end of their bridge face a closed door for extensions. Property chains relying on undrawn MFS completions are collapsing. Consequently, thousands of borrowers are defaulting to punitive standard variable rates (SVRs) or penalty rates, unable to refinance quickly due to the sudden market shock. These borrowers are functionally trapped, holding partially completed or un-refinanceable assets while their debt servicing costs spiral out of control.
The Propenomix Take: Welcome to the reality of the Zombie Portfolio. I have repeatedly warned about the fatal flaw of relying on short-term specialist debt without an absolute, ironclad "bridge-to-exit" strategy. When your lender dies, you don't get a free pass; you become a hostage to the administrators. The Propenomix reality check is that the macro environment has shifted from a forgiving, high-liquidity market to a punishing, tight-liquidity one. Developers who assumed they could just "roll over" their bridge or secure a quick development exit are now learning that counterparty risk is a two-way street. If you are caught in this web, the strategy must pivot instantly to triage: liquidate marginal assets, bring in emergency equity, or find a joint venture partner immediately. Praying for leniency from an administrator whose mandate is purely to recoup Barclays' missing hundreds of millions is a guaranteed path to receivership.
Theme 4: The Fundamental Repricing of UK Property Finance
The Facts: The immediate response across the surviving UK specialist lending market has been highly defensive and restrictive. Mainstream banks, alerted by the MFS fraud allegations, are imposing emergency audits on their own wholesale funding lines provided to other bridging and buy-to-let lenders. Consequently, surviving lenders are heavily tightening their underwriting criteria overnight. Loan-to-value (LTV) limits are being aggressively dialed back, collateral valuations are facing severe downward pressure from increasingly cautious surveyors, and borrower background checks are intensifying. The cost of capital for these lenders is spiking as institutional backers demand higher risk premiums to compensate for the sudden lack of trust in the sector. This increased cost is being directly passed onto the end consumer - the property developer and investor - resulting in higher arrangement fees, wider interest rate spreads, and a dramatically slower time-to-completion for new loan origination.
The Propenomix Take: The structural fault lines are shifting under our feet. For the past ten years, bridging finance was treated like a commodity - cheap, fast, and easily accessible. The MFS collapse marks the definitive end of that cycle. The Propenomix Take is that we could witness a fundamental, long-term repricing of risk in UK property finance. The no-nonsense economics dictate that when trust evaporates, the cost of money skyrockets. For the active investor, this means the spreadsheets need tearing up and rebuilding. Deals that penciled out at 75% LTV with an assumed 10% bridging cost are now dead on arrival. Success in 2026 and beyond will belong entirely to those who can buy at genuine value, add significant margin, and fund deals with lower leverage and longer-term, secure capital stacks. The cowboys are being cleared out; the market is returning to fundamentals, and it is going to be a painful, but entirely necessary, correction. What defines how deep this goes? Ultimately, is MFS the only one? Or are more robust post-hoc due diligence dives - inspired by this situation - going to uncover a whole host of MFS-style clones?
OK - let us spring into the spring statement.
Theme 1: Economic Growth and Inflationary Pressures
The Summary: Chancellor Rachel Reeves delivered the Spring Forecast 2026 speech, emphasising that inflation and borrowing are down while the economy is growing. The Office for Budget Responsibility expects inflation to fall even faster than it forecast in the Autumn (oops). The speech highlighted that there have been six cuts in interest rates since the General Election. This represents the fastest pace in reduction in 17 years. Gross Domestic Product (GDP) is forecast to grow by 1.1% in 2026, 1.6% in both 2027 and 2028, and 1.5% in both 2029 and 2030. Furthermore, GDP per person is projected to see growth of 5.6% over the course of this Parliament. Reeves noted that the interest rate cuts will save households over £1,300 per year on a typical new fixed-rate mortgage.
The Propenomix Perspective
The Chancellor is keen to take a victory lap on falling inflation and those six rate cuts, but let us look under the bonnet. Yes, the headline rate is down, but that does not undo the massive compounding of prices over the last four years. The Bank of England might be (and as discussed, it really might NOT be now) cutting base rates, but SONIA swap rates are still pricing in a hefty dose of medium-term reality, meaning mortgage pricing is not falling as fast as the headlines suggest. The OBR's 1.1% GDP growth for 2026 is hardly a roaring tiger economy - it is essentially flatlining in real terms when you strip out government spending. While a £1,300 saving on a mortgage sounds lovely for the front pages, it barely scratches the surface for landlords refinancing off 2% fixes onto 4.5% deals today. The market is shifting - and quickly - but I am not convinced the Treasury fully grasps the structural constraints holding back genuine private sector expansion.
Theme 2: Public Finances and Gilt Yields
The Summary: A significant pillar of the Chancellor's speech focused on fiscal stability. The OBR forecast indicates that borrowing is set to reduce by nearly £18 billion compared to the Autumn. Public Sector Net Borrowing is projected to decrease steadily from 4.3% this year to 1.8% in 2029-30. Reeves highlighted that yields on UK government debt fell between the Budget and this forecast, whereas average yields rose for the rest of the G7. Consequently, the government is expected to spend nearly £4 billion a year less on debt interest next year than was forecast in the Autumn. Fiscal headroom against the stability rule in 2029-30 has increased to £23.6 billion, while headroom against the investment rule is higher at £27.1 billion. Debt is also set to be lower in every year of the forecast compared with the Autumn.
The Propenomix Perspective
Now this is where it gets interesting for property investors. The Chancellor is boasting about falling gilt yields while the rest of the G7 sees theirs rise. That would be good news for our borrowing costs, theoretically, if it weren’t for Iran. If UK government debt is getting cheaper to service, we should eventually see that filter through to commercial and buy-to-let mortgage pricing. However, a fiscal headroom of £23.6 billion is a rounding error in the grand scheme of the UK economy, leaving very little margin for safety if there is an external shock (do we need to ramp up defence spending even faster at this point, for example?). Reeves talks a big game about fiscal responsibility, but with a structural deficit still looming large, the tax burden on property is unlikely to lighten for asset owners anytime soon. I will be keeping a very close eye on the bond markets - if those yields tick back up more permanently, the cost of capital will squeeze developer margins even further.
Theme 3: Housing, Infrastructure, and "The Builders"
The Summary: The Chancellor underscored the government's commitment to reshaping the economy through infrastructure and housing investment. Reeves stressed the need to build growth broadly by creating capacity in the economy through affordable housing and better transport. A key policy directive mentioned was the choice to "back the builders, not the blockers". Additionally, the Treasury Spending Rules within the Green Book are being reformed to unlock investment in urban, rural, and coastal communities. The speech framed the government as an active and strategic state that steps up to build growth. This is paired with ongoing commitments to more planning reforms and increased public investment.
The Propenomix Perspective: "Back the builders, not the blockers" - a brilliant soundbite, but one I have heard from almost every Chancellor since I started in this game. The intention to reform the Green Book and tweak planning regulations is welcome on paper, but it completely misses the immediate, boots-on-the-ground bottlenecks. We still have a severe shortage of skilled labour, material costs remain stubbornly high, and the planning system is fundamentally broken at the local authority level - not just within the Treasury. You can mandate all the housing targets you want from Whitehall, but until we solve the viability issues for developers, especially SME housebuilders, those homes will simply not come out of the ground. An "active state" usually means more red tape masquerading as assistance. Unless this rhetoric translates into spades in the ground and a streamlined path from land acquisition to practical completion, the chronic supply-and-demand imbalance in the UK property market is here to stay.
Ultimately, Reeves drew a lot of criticism for not completely amending the speech to take into account the events in Iran. I can understand both sides of the argument. There’s no credible story around how long all of this is going to take, and if it WAS wrapped up in a few weeks, the long-term economic damage would be very minimal. A few months - sub-optimal, but ultimately not going to trigger any major shocks or issues. Longer than that - we might find ourselves with new energy price guarantees, yet more debt, and real disturbance. When the “best” outcome for a lot of the world looks like an Iranian civil war, in order to effect real regime change (objective reports I’ve been listening to seem to suggest that as many people are for it as against it, as so often - a 52/48 situation if you will) - there’s no clarity and some bears are suggesting a multi-decade long conflict (which - arguably - is the status quo).
What about the OBR forecast then? Was my initial gut feeling right - was it any good? Recent works over months and years really haven’t been up to much, particularly when Covid disrupted everything so much. That’s no real surprise - models just don’t work well in those situations, when you have no data that isn’t 100+ years old, and the world looks very different compared to the “old days”. This is the Propenomix Summary of the EFO - the Economic and Fiscal Outlook - from the OBR from March 2026. Do they deserve their Propenomix moniker of the “Office for the Bloody Ridiculous”?
Theme 1: The Macro Picture and Stagnant Living Standards
Summary: The Office for Budget Responsibility report projects real GDP growth to slow from 1.4 per cent in 2025 to just 1.1 per cent in 2026. This near-term sluggishness is largely attributed to cyclical weakness and a loosening labour market. Over the medium term, potential output growth is expected to average 1.3 per cent, supported by a slight recovery in productivity but hindered by lower net inward migration and an ageing population. Crucially, the forecast highlights a stark reality regarding living standards: if the pre-2008 productivity trends had continued uninterrupted, real GDP per person would be roughly 30 per cent higher today. Unemployment is also forecast to increase from 4.75 per cent to a peak of 5.3 per cent in 2026 before beginning to ease.
Propenomix Perspective: I look at these GDP figures and all I see is an economy running on fumes. The official data tells us growth is slowing to a miserable 1.1 per cent and unemployment is ticking up. I have an objective problem with this. I sometimes lose my cool in these situations and perhaps you will see why. The bottom line is that EMployment - the “real number”, to be honest - is up from 74.6% at the point of the election to 75.0% at the latest count. Is this because the Labour party is doing a great job? NO. Objectively, we know they aren’t. No - this is the economy doing what it does in SPITE of weak governance. It was recovering from a lot of long-term sickness - and figures are now much better - and whilst I don’t like the number at 5.2% for unemployment, the private sector seems to have endured the majority of the shocks that Labour have thrown at it and has started 2026 keeping calm and carrying on, as evidenced by the PMIs.
The public sector is doing very nicely, thank you - well funded, and wages are on the rise (with MPs being in the spotlight this week - that’s a tale for another day). £378bn is the infrastructure spend over the next 5 years - that will create returns, growth, and make a difference to the economy. There WAS no real reason to get bearish about growth this year - before the geopolitical events - in my opinion. The OBR has just got the direction of travel wrong, in my view.
If they are right - even if it is for the wrong reasons - what does that mean for the property market? It means real wage growth - the very thing that supports tenant affordability and underpins first-time buyer demand - is going to hit a brick wall. The frankly terrifying statistic is that our living standards are effectively 30 per cent lower than they should be if we had not completely lost our way after 2008. We are a less wealthy nation, pure and simple. As a property investor, you cannot rely on a rising macroeconomic tide to lift all boats anymore. This structural lack of growth means capital appreciation will be fiercely localised, driven by specific supply constraints rather than a booming national economy. If you are waiting for a golden age of productivity to boost your yields, you might be waiting a long time - however, I’m not a productivity bear. I see AI as providing big productivity gains and solving some of the puzzles that we’ve faced over recent years. All the entrepreneurs I know who have embraced AI are simply doing more - sometimes many multiples of more - NOT looking at ways to cut jobs. It should mean growth, growth, growth (finally) - what it means for inequality is another topic.
Theme 2: Rates, Inflation, and the Cost of Capital
Summary: The central forecast anticipates CPI inflation falling from 3.4 per cent in 2025 down to 2.3 per cent in 2026, eventually returning to the Bank of England's 2.0 per cent target. This moderation is driven by lower global food and energy prices, coupled with growing slack within the domestic economy (oops). In response, market expectations suggest the Bank Rate will decrease from 3.75 per cent to 3.3 per cent by late 2026, before gradually rising back to 4.0 per cent by the end of 2030. Gilt yields have also softened across all maturities compared to the November forecast, with the 10-year gilt yield sitting at 4.5 per cent and the 30-year yield at 5.3 per cent.
Propenomix Perspective: Inflation falling back towards 2 per cent is exactly the headline the politicians want you to read, but let us look under the hood. The Bank Rate was priced to drift down to 3.3 per cent this year (as of today, it looks more like 3.5%) - on the surface sounds like good news for anyone looking to refinance a buy-to-let portfolio. But do not start popping the champagne just yet. Gilt yields are still sticky around that 4 per cent mark, and this week has evidenced that. SONIA swap rates and the broader bond market are telling us unequivocally that investors do not believe in a return to the zero-interest-rate era. The reality is that the cost of capital has structurally shifted higher. We are operating in an environment where 5%+ mortgage rates are the new normal. If your investment model relies on refinancing at 2% to pull out equity, your model is entirely broken. You have to buy for yield and you have to actively add value, because the central banks are not going to bail you out with cheap money anymore.
Theme 3: The Housing Market and Planning Fantasy
Summary: House price inflation is projected to average slightly above 2.5 per cent over the remainder of the forecast period, moving broadly in line with average income growth. However, the physical supply of homes paints a volatile picture. Net additions to the UK housing stock are expected to drop from an average of 260,000 a year in the early 2020s to a low of 220,000 in 2026-27, reflecting a recent slump in housing starts. The forecast assumes a sharp rebound thereafter, with net additions rising to just over 305,000 by 2030-31. This medium-term surge is explicitly predicated on the successful impact of the Government's previously announced planning reforms.
Propenomix Perspective: This is where the official report moves from economics to pure fantasy. They are projecting a massive jump to 305,000 net additions by the end of the decade, entirely based on the magical impact of planning reforms. I will believe it when I see the bricks in the ground. The reality right now is a catastrophic drop to 220,000 homes next year. Local planning departments are completely under-resourced, developers are battling viability issues at every turn, and the cost of materials remains stubbornly high. This structural supply failure is exactly why house prices will remain supported despite the higher mortgage rates. If the supply simply is not there, values cannot crash. As an investor, this chronic undersupply is your ultimate safety net. While the government publishes aspirational spreadsheets about planning reforms, the real market will continue to be defined by a fundamental scarcity of decent housing, which will keep a firm floor under both capital values and rental growth.
I have said all the way along - planning was the first part of the process. The rest - which all adds up to viability - is much harder to fix, especially in an administration that is addicted to regulation, and has added more on to new build developers (including solar panels, for example), without a market that is supporting price increases on new build delivery.
Theme 4: The Fiscal Squeeze and the Tax Burden
Summary: Public sector receipts are forecast to rise significantly, pushing the UK's tax-to-GDP ratio to a post-war high of 38.5 per cent by 2030-31. This represents an increase of nearly 6 percentage points compared to pre-pandemic levels. A primary driver of this rising tax burden is the prolonged freeze on personal tax thresholds, which will pull more individuals into higher tax brackets as nominal earnings grow. Capital taxes are also forecast to rise sharply, bolstered by higher equity prices and recent policy adjustments to the inheritance and capital gains tax regimes. The report cautions that this elevated tax burden increases the risk of distorting economic activity and constraining incentives to work, save, and invest.
Propenomix Perspective: Welcome to the highest tax burden since the aftermath of the Second World War. A 38.5 per cent tax-to-GDP ratio is a phenomenal drag on wealth creation. The government is quietly pickpocketing the nation through fiscal drag, freezing personal thresholds while inflation does the dirty work. For property investors, the squeeze on capital taxes is the real, existential threat here. The recent adjustments to capital gains and inheritance tax regimes are explicitly designed to target asset owners. We are being squeezed from all sides - higher mortgage costs, punishing regulatory rules, and now an ever-expanding capital tax net. This means your net return - the actual cash left in your pocket - is under severe threat. You cannot simply buy a property, sit on it, and let inflation make you wealthy anymore, because the Treasury will take an increasingly large slice of that nominal gain. Efficiency, corporate structuring, and rigorous tax planning are no longer optional extras - they are the only way to survive in this landscape.
How about Consumption and Interest Rates? This report is timely for a whole number of reasons - but I’ve been banging this drum about consumption being the engine of GDP growth for some years now. We need that savings rate to come DOWN, aside from anything else. But what do the researchers at the Bank of England think, and what will they be feeding into the Monetary Policy Committee?
Theme 1: The True Scale of the Household Debt Channel
The Summary: This recent Bank of England working paper examines the household debt channel, demonstrating exactly how interest rate adjustments impact consumption among UK mortgagors. Using extensive administrative UK data to analyse six million household-level natural experiments caused by the staggered expiry of fixed-rate mortgages, the researchers established a highly significant pass-through effect. Specifically, a 1 percentage point reduction in mortgage rates leads to a robust 3% increase in consumption among these households over the subsequent six months. The research suggests that the marginal propensity to consume out of this freed-up cash flow is approximately 0.5. On a macro level, the impact is immense: if all mortgage deals were to expire simultaneously, this 1 percentage point cut would generate an aggregate consumption increase worth approximately 0.7% of UK GDP. This highlights just how central household debt is to the broader macroeconomic picture.
The Propenomix Perspective:
Well, colour me shocked. The Bank of England has finally produced a working paper confirming what anyone with a pulse and a property portfolio has known for a decade - when debt gets cheaper, people spend more. But let us look under the bonnet here. They are touting this 3% consumption bump as a macro revelation, but it is purely mechanical. When you artificially suppress the cost of capital, you do not just free up cash - you actively disincentivise saving and force capital into the real economy. The index says we get a neat, sterile GDP boost, but real-term inflation says that 3% is mostly getting swallowed by the rising cost of non-durables, building materials, and flat whites. Furthermore, relying on this debt channel assumes a functioning, liquid market. With gilt yields still twitchy and lenders pricing in risk premiums that make an absolute mockery of the base rate, that clean 1 percentage point cut they model is a pipe dream for the average punter coming off a sub-2% fix from 2021. The reality is far messier. I probably don’t need to point out that there is no such “event horizon” day where all fixed-rate mortgages expire, either. But you see why, in a cutting cycle, the wind starts to be behind us even if the interest rate is still restrictive - it’s all relative, not absolute.
Theme 2: Borrowing Against Bricks - The Asset Price Engine
The Summary: The report significantly shifts the narrative on precisely why rate cuts boost spending. While previous consensus heavily emphasised the "mortgage cash flow effect" - where lower rates simply reduce monthly debt service costs and leave more cash in the bank - this study finds that increased borrowing capacity is actually the primary driver. As interest rates fall, house prices typically rise, and the researchers show that households actively borrow against this newly created housing equity. In fact, this borrowing mechanism accounts for approximately two thirds of the total increase in cash-on-hand following a rate cut, vastly overshadowing the savings from lower monthly payments. The data reveals that in regions where house prices are highly sensitive to interest rates, the borrowing and consumption responses are significantly higher than those seen in regions with stagnant asset prices, proving that housing collateral is the engine of consumption.
The Propenomix Perspective: This is where the academics finally catch up to the streets. The narrative has always been that lower rates mean cheaper mortgages, so families have an extra hundred quid a month for Deliveroo. Nonsense. What really happens is that the rate drops, the surveyor signs off on a 6% uplift in the valuation, and the borrower extracts twenty grand in equity to chuck towards an extension or a new Audi. I have said it before - the UK economy is essentially a giant housing derivative. But here is the rub: this entire mechanism relies on chronic supply constraints to ensure prices keep inflating. If you live in an area with inelastic supply, you get the equity lottery win. If you do not, you are left out in the cold. It also makes a mockery of the idea that we can engineer a soft landing without keeping the housing market buoyant. Kill the equity extraction, and you kill the high street - simple as that. The bank is relying on our lack of building to fuel their consumption figures. That’s what we’ve been seeing over the past 3+ years in many parts of the country - although forced wage rises (post-pandemic, and policy driven) have mitigated this impact.
Theme 3: The Staggered Squeeze - Long and Variable Lags
The Summary: The structural nature of the UK mortgage market fundamentally delays the aggregate macroeconomic impact of monetary policy. Because approximately 95% of new UK mortgages are fixed-rate deals typically lasting two, three, or five years, households only experience rate changes at predetermined, staggered intervals. The study models this delay, concluding that the cumulative macroeconomic impact of an interest rate shift takes around 50 months to fully materialise across the broader economy. Furthermore, the length of these lags is highly variable and heavily depends on the prevailing duration of mortgage deals. As the average fixed term lengthened notably between 2016 and 2023, the immediate impact of rate changes on aggregate consumption was effectively halved, pushing the economic response further into the future and significantly complicating the timing of central bank interventions.
The Propenomix Perspective: Fifty months. The “old money” wisdom was 6 months to 2 years. Now THAT is inflation! Let that sink in for a moment. The Monetary Policy Committee sits around fiddling with the base rate, acting as if they are steering a sports car, when in reality they are communicating via carrier pigeon with a very slow oil tanker. We all watch the SONIA swap rates dance around daily, panicking over fifty basis points, but the actual transmission into the real economy takes over four years. By the time today's rate hike or cut actually hits the majority of the market, the macroeconomic cycle will have turned over twice. And they wonder why their forecasting models are consistently broken. The fact that borrowers locked into five-year fixes during the 2020-2021 low-rate bonanza means there was a massive block of the market entirely insulated from the 2021-24 tightening cycle - was….. They’ve now nearly all fallen off that cliff, and will all be off by the end of 2027. The aggregate collateral damage has been severe to economic growth, as you have been seeing. The system is not fundamentally broken - it is just operating on a time delay that the central planners refuse to properly acknowledge or price in.
Until next week, keep an eye on the swap rates, but remember - the real economy is running on a four-year delay or more!
So - here’s the wrap for the month - the section detailing my thinking, and how I am applying all of this. The world is burning, and your spreadsheet is lying to you. Oil is up 40% this month. Gas is up 60%. The Strait of Hormuz is effectively closed due to insurance risks. The bond markets have panicked; 5-year gilts drifted from 3.723% to a 4.038% yield in a single week. Anyone who thought we were sliding back into an era of cheap money is currently waking up to a brutal reality. The market opinion of a Bank of England rate cut this month has collapsed from nearly 90% to barely 20%.
Kill the Zombie Debt Strategies
Market Financial Solutions has collapsed into administration amid allegations of systemic fraud and double-pledging. The numbers reveal an 80% shortfall, with nearly £930 million effectively missing. The structural fault lines are shifting under our feet. Surviving lenders are terrified. They are aggressively dialling back loan-to-value limits and tightening underwriting criteria overnight. If your model relies on 75% LTV bridging finance with an assumed 10% cost, that deal is dead on arrival. Stop relying on short-term specialist debt without an ironclad exit strategy. If you are caught in this web, you must pivot instantly to triage. Liquidate marginal assets or find a joint venture partner immediately.
Lock Your Rates Now
Five-year swap rates closed Thursday at 3.725% and are possibly heading to 4% or more. We are operating in an environment where mortgage rates above 5% are the new normal. The idea of refinancing at 2% to pull out equity is completely broken. Lock in whatever rates you can now. The transmission of monetary policy is painfully slow. Because 95% of new UK mortgages are fixed-rate deals, the cumulative macroeconomic impact of an interest rate shift takes around 50 months to fully materialise. Do not wait for a miracle drop that will take over four years to reach your portfolio.
Hide Behind the Supply Collapse
The Office for Budget Responsibility is peddling a fantasy of 305,000 net additions to the housing stock by 2030 based on planning reforms. The brutal truth on the ground is a catastrophic drop to 220,000 homes in 2026-27. Local planning departments are under-resourced and developers are battling viability issues at every turn. This chronic undersupply is your ultimate safety net. Values cannot crash if the physical supply simply is not there. Buy for genuine yield and actively add value. Capital appreciation will be fiercely localised, driven by these specific supply constraints rather than a booming national economy.
Structure for the Tax Squeeze
The UK tax-to-GDP ratio is hitting a post-war high of 38.5% by 2030-31. The government is actively targeting asset owners through prolonged freezes on personal tax thresholds and sharp rises in capital taxes. You cannot simply buy a property, sit on it, and let inflation make you wealthy anymore. The Treasury will take an increasingly large slice of that nominal gain. Efficiency, corporate structuring, and rigorous tax planning are no longer optional extras. They are the only way to survive.
The Kicker
The Bank of England knows that house price equity extraction is the engine of UK consumption. Kill the equity extraction, and you kill the high street. The entire system relies on our lack of building to fuel their consumption figures. The era of easy money is over. The cowboys are being cleared out, and the market is returning to fundamentals. Protect your margins, because nobody else will.
As we get towards the end for this week - our Manchester Property Business workshop is continuing to sell very well. 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. Anything individual to consider? Get a VIP ticket and join us for dinner, in a smaller setting with an opportunity to discuss any specific roadblocks or issues in your property business at the moment. Our VIP dinner was absolutely incredible in January, and got some superb feedback - the upgrade is well worth it. There are TWO Super Early Bird tickets left, make sure to snag one before they are all sold out! 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 have an amazing Golden Quarter together, it is a case of “here we go” in my opinion.