Get your name down for the October Property Business Workshop in Manchester: tinyurl.com/pbwoct26
"I would like to come back as the bond market. You can intimidate everybody." - James Carville, adviser to President Clinton, 1993
The quote pertains to the whole week (or even just the Global Economy at the moment!), if I'm honest, but most directly to the Deep Dive, where we spend some time with an IMF assessment of the gilt market that lands like a welcome card on the new Prime Minister's doormat. A fortnight ago I quoted Denis Healey on the first law of holes and expressed the hope that none of the Chancellor candidates would use him as inspiration. The universe, which clearly reads the Supplement, has responded by sending us an actual Healey to the Treasury - John, not Denis, no relation as far as I can tell, but the surname alone has had the political sketch writers reaching for the 1976 IMF crisis all week. More on the man, his five priorities, and what the bond market made of his arrival below. It has been quite the seven days: a new Prime Minister on Monday, a surprise Chancellor by Monday evening, a soft inflation print on Wednesday, oil back through $100 a barrel on Thursday, and a swap curve that spent the whole time quietly ratcheting the wrong way for anyone with a remortgage due. Carville's line was a joke in 1993. In the summer of 2026 it reads more like a job description.
As a new government works out where the kettle is, our next Property Business Workshop is live and tickets are moving. October, Manchester, with myself and Rod Turner - and this one is about Joint Ventures and M&A. How to structure a JV that survives contact with reality, how to buy a portfolio (or a company) rather than a house, and how to avoid the classic partnership blow-ups that Rod and I have seen more times than either of us would like. If the next decade or more is going to be about consolidation in the sector - and I strongly believe that will be the case - this is the workshop for it. Book in at tinyurl.com/pbwoct26
Welcome back to Trumpwatch. New Prime Minister, same President - and Burnham got the full transatlantic experience inside his first ninety-six hours: a phone call, a tariff schedule, and an oil chart doing things nobody in Downing Street wanted to see. Three stories this week, and for once the middle one is actually good news for Britain.
Start with the call. Trump and Burnham spoke on Monday, within hours of the King inviting Burnham to form a government, and the President's readout on Truth Social was vintage: the two men discussed, in Trump's own capitalised list, North Sea Oil, Trade, the Military Alliance and the Demining of the Hormuz Strait, before signing off with a wish of good luck and godspeed. Burnham's office confirmed the substance: a commitment to defence and security, and UK support for the safe reopening of the Strait of Hormuz, which has been effectively blocked since the start of the war and is a large part of why your diesel costs what it costs. So far, so cordial. The interesting wrinkle came in a separate Trump post claiming Burnham had told him Britain would be opening up the North Sea "all the way" - which sits rather awkwardly against the deputy Labour leader's line that the ban on new exploration licences stays, pragmatism or no pragmatism. Somebody is going to be disappointed, and my suspicion is that both men currently believe it will be the other one. Trump had called Burnham "extremely liberal" only a few weeks ago; now the call "went very well". Can we read anything durable into any of this? Probably not yet - first calls always go very well, that's what first calls are for. The test arrives when the two actually meet, which both sides say will happen soon. I said last week that Burnham should study Mark Carney's playbook rather than Starmer's; the early signs are of a man trying to be agreeable on security and immovable on energy, and whether that combination survives contact with a President who negotiates by ultimatum, we'll see.
Story two: the tariffs, and a rare unambiguous win. With the temporary global tariffs expired and the Supreme Court having struck down the earlier "reciprocal" framework, the administration rebuilt its wall this week under Section 301 of the 1974 Trade Act - duties on goods from 60 trading partners covering, per Reuters' arithmetic, 99.4% of US imports, all dressed in the language of forced-labour enforcement. The UK's headline rate stays at 10%, in line with last year's economic prosperity deal, with the car, pharmaceutical and aerospace carve-outs intact. The EU's near-blanket rate, meanwhile, was cut from 15% to 10% - which means the five-point advantage UK exporters in secondary goods enjoyed over their European rivals has evaporated overnight. No change on paper for Britain; a real change in relative position. Trade bodies have noticed, even if the headline writers largely haven't.
And then the whisky. From Friday, Scotch and other UK whiskies enter the United States at a tariff rate of precisely zero - carved out of the Section 301 action by name, right down to the customs codes. The Scotch Whisky Association, whose members sold £933m of the stuff into the US last year, was understandably delighted; so was the Scottish First Minister; so, one imagines, was a brand-new Prime Minister handed a tangible trade win in his first week that he had precisely nothing to do with. The groundwork appears to trace back to the King's state visit hospitality in April, which tells you something about how this particular White House actually makes trade policy. Medical technology got the zero rate too, though it makes for a less romantic press release. The EU's spirits industry immediately asked for the same treatment for its own producers, which rather proves the point: for the first time in a while, the UK has a visible tariff advantage over European competitors in a flagship export category. Special relationship, measured in single malts. Standard Fare, in its own way - but the good kind, for once.
Story three is the one that matters for your mortgage. The Middle East escalated again, and oil went with it. Iran's Houthi allies declared a maritime blockade against Riyadh and struck two Saudi tankers in the Red Sea with drones and missiles - the Red Sea being the key alternative route while Hormuz remains disrupted. Trump responded by threatening what he called major military punishment, told Axios he was considering a massive attack on Iran, bigger than ever before, and US Central Command carried out its thirteenth consecutive night of strikes. Add the Caspian Pipeline Consortium suspending loadings at its Black Sea terminal after Ukrainian tanker attacks - a route carrying roughly 80% of Kazakhstan's crude exports - and you have, in ING's assessment, potential supply disruptions larger than at any point in the war so far. Brent crossed $100 a barrel on Thursday for the first time since late May, closing at $100.69, up around 7% on the day, before easing back to settle near $97 on Friday as traders digested reports of stalled peace talks and took some profit. Even after the Friday retreat, the week's gain was around 10%, and WTI sat in the low 90s. Rapidan raised its fourth-quarter Brent forecast from $85 to roughly $100 on the assumption the disruption persists. Remember that a fortnight ago Brent was in the high 80s and we were all breathing a little easier (it was in the low 70s on 1st July). Keep an eye on the diesel, folks - it fell 10.7p a litre in June, which flattered Wednesday's inflation print enormously, and the late-July price action points the other way entirely (with interest).
Why does the transatlantic theatre matter to a portfolio in Derby or Dunstable? Same answer as ever: tariffs and tankers feed inflation expectations, inflation expectations feed Treasuries, Treasuries feed gilts, and gilts feed the swap rates that price your next fixed-rate mortgage. This week every link in that chain was live, and we will get to the gilts section shortly, where the news is - and I'll soften nothing here - not good. Phew. Back to the safety of the UK real-time property market.
As is customary, Chris Watkin has been relentlessly crunching the portal numbers, and his analysis for Week 28 of 2026 is where it is at, as always. If you want to know how the macro noise translates to the local high street, and the REAL property market on the ground, look no further.
Supply first. 33.7k new listings this week, down a touch from 34.7k last week, against a 2026 weekly average of 37k and a ten-year Week 28 average of 34.1k. So a week fractionally below the long-run seasonal norm - the second in a row, which supports the thread I picked up last week that the great listings glut, as measured by how fast the water is coming into the bath, may finally be easing. Is it easing because the exodus by smaller landlords intent on repurposing capital has come to an end? Or have they given up going on the market in the first place? The year-to-date picture: 1.035m new listings so far in 2026, now 0.2% below 2025's 1.037m at the same point, 4.2% ahead of 2024, and 11.7% above the 2017-19 pre-Covid average of 927k. Note that the excess over pre-Covid normality has drifted down from the 12%-plus I was quoting a few weeks ago to 11.7% - my upgraded ready reckoner of "10 to 15% more stock than a normal market" still holds, but we are edging back towards the middle of that band rather than the top. Rightmove's July index, published Monday, adds useful colour from the pricing side: the average asking price of newly listed homes fell 1.0% on the month, some £3,832, to £372,359 - the largest July drop in a decade against a ten-year July norm of minus 0.2% - with sellers trying to tempt buyers distracted by, in Rightmove's own list, the World Cup, the heatwave and a change of Prime Minister. Stock per agent remains within a whisker of a twelve-year high. A million-listing market with vendors cutting asking prices at record pace for the season is exactly what the withdrawal statistics below would predict. The system is consistent, even when it is consistently uncomfortable.
Demand side. 23.6k homes went sold subject to contract this week, essentially flat on last week's 23.5k, against a ten-year Week 28 average of 25.3k and a 2026 weekly average of 24.7k. Last week I promised we would check for a World Cup bounce once the one-week reporting lag washed through - and on this first look there isn't much of one, though the honest answer is that the cleanest read arrives in next week's numbers. England’s biennial disappointment isn’t yet far enough in the rear view mirror. The year to date has seen 691k gross sales: 7% below 2025's 743k, and - this is the line of the week - now IDENTICAL to 2024's 691k. To the thousand. Still 10.7% ahead of 2023, still 6.6% above the 2017-19 pre-Covid years. The comparison-year point I made last week has now reached its logical destination: 2026 began the year with a comfortable lead over 2024, and that lead has been fully consumed. However, week to week, the gap that started to appear between the 2024 net sales line and the 2026 one was fully closed this week. I will be keeping an eye on that one. Definitely still a shift down on the 2025 market though.
Net sales - gross less the fall-throughs - came in at 18.1k for the week (17.9k last week), against a ten-year Week 28 average of 19.2k. Year to date: 537,462 net sales, 5.4% below 2025, 12.7% ahead of 2023, 4.5% above the 2017-19 average - and just 0.1% ahead of 2024. In homes, the entire year-to-date cushion over 2024 is now 376 of them. Three hundred and seventy-six, across the whole of the United Kingdom, after twenty-eight weeks. The Five Ds - death, debt, divorce, downsizing and the diddy ones - keep the engine turning, and the engine is running at almost exactly its 2024 speed, which was itself a below-average year. Not a bad market. Not a good one either. A sideways one, being fought over line by line. The best kind for buying in (no fears over falling knives), a trappy one to sell in.
Now the friction number. June's exchange data has firmed up with another month of late reporting: 72.7k exchanges now recorded for the month, expected to finish in the late 70ks, against 70.4k withdrawals. Which means 50.8% of homes that left agents' books in June exchanged and completed - the other 49.2% withdrew, unsold. The seven-year average is 57.6%, and that average includes the fever-dream post-lockdown period. I keep quoting this stat because I still find it faintly astonishing: put your home on the market in Britain in 2026 and your odds of actually selling it, by the time you leave the market one way or another, remain a coin flip. Last week's provisional read was 50.9%; the updated one is 50.8%. The coin is not getting any friendlier. And it is the single best explanation for both the Rightmove asking-price cut and the withdrawal pipeline that keeps feeding realistic vendors to prepared buyers. Would I call it a distressed market? No, and I'd still be careful with anyone who does - volumes above pre-Covid norms are not what distress looks like. It is a grinding, high-friction, well-supplied, sideways market. Historically, to labour the point, rather a good one to be buying in, if you buy right, and provided you remember it will not do your compounding for you this year.
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!
Dust off the Macroscope, then. Meat week, folks, as promised: the labour market report on Tuesday, inflation on Wednesday, the flash PMIs on Friday - with the public sector finances folded into the gilts discussion, where they belong this week. And bringing up the rear, the contract states that we have to talk about the gilts and swaps, and I warn you now that the contract earns its money again.
The labour market first, and regular readers will know the drill by now: the unemployment rate is the number everyone quotes, and it is one third of the picture at best. The labour force splits three ways - the employed (in work), the unemployed (not in work but actively looking and able to start), and the economically inactive (not in work and not looking) - and you cannot read one segment without the other two, because people flow between all three and the flows are where the story lives. So, all three, in turn.
Unemployment: 4.9% for March to May, up 0.2 points on the year but down 0.1% on the latest quarter. Employment: 75.1% of 16-to-64-year-olds in work - very slightly better than 3 in 4 - down 0.1% on the year but up 0.1% on the quarter. Inactivity: 20.9%, down 0.1% on both the year and the quarter. Notice anything about the quarterly column? All three segments moved in the right direction at once - more people in work, fewer people looking, fewer people on the sidelines altogether. That is a rare alignment, and on the face of it the most encouraging single quarter of labour market data we have had in a while. Now let me hedge it properly, because one quarter of LFS data proves very little: the survey remains an official statistic "in development", the ONS had an operational wobble in May (under-resourced telephone interviewing - they assess minimal impact on the headline rates, some impact on the hours data), and this very month they revised the whole series back to early 2020 as part of a seasonal adjustment review. Directionally pleasing; structurally, hold it loosely.
The annual column tells a different and subtler story, and it is the one worth understanding. Over the year, employment is down only 0.1, while unemployment is up 0.2 and inactivity is down 0.1. Squint at those three numbers together and you see it: around half of the rise in “unemployment” over the past year is not people losing jobs, it is people moving OFF the sidelines and INTO the search - from inactive to unemployed, which in this data is a promotion. The same mechanism I unpicked back in February, when a jump in the headline rate turned out on inspection to be a participation story. (For the pedants, like me: the two rates don't share a denominator - the employment and inactivity rates are shares of everyone aged 16 to 64, while the unemployment rate is a share of the economically active aged 16 and over, which is why a 75.1% employment rate, a 4.9% unemployment rate and a 20.9% inactivity rate don't sum neatly to anything. If you are 68 and job-hunting, you count as unemployed but sit outside the other two measures entirely. I don't run the ONS, and the international comparability argument is real, but 16-64 is an increasingly odd window on a society where a decent slice of the workforce is older than the window allows, and this needs changing - just points towards the lack of a driving force in ensuring quality and integrity in our statistics at a national level, given the importance placed on the unemployment rate).
The longer arc: when Labour came to power in 2024 the employment rate was 74.6%; by February it had reached 75%, and it now stands at 75.1%, with inactivity grinding down along the way - genuine, unglamorous progress, and I'll credit it. Pre-Covid we managed 76.5%, so that remains the aspiration, and at the current pace of improvement, closing that gap takes the best part of another Parliament. Let's see whether "growth in every postcode" moves that number, because it is the number that matters most.
Against that steadying stock picture, the flow data still leaks. Payrolled employees fell 85,000 in the year to May but were flat on the month; the June flash estimate showed a fall of just 4,000 on the month, 71,000 on the year, to 30.3 million. And here we hit this month's data quarrel: over the latest quarter the LFS reckons employee numbers ROSE 115,000 while the tax data says they FELL 30,000. The ONS's own guidance remains that the tax data is the more reliable measure of employees, and when the survey and the receipts disagree, I side with the receipts - though I'd note the honest possibility that the truth sits between them, and the ONS itself says it will judge whether the divergence is sustained next month. Vacancies came in at 712,000 for April to June, down just 0.9% on the quarter - still falling, but at a crawl now rather than a slide, and the level was actually revised UP from the 707,000 we discussed last month, which tells you how much weight to put on any single vacancies print. The claimant count rose on the month to 1.689 million.
Pay is where the disinflation evidence lives. Regular earnings growth of 3.4% (4.3% including bonuses), which after inflation is worth about 0.3% to 0.4% in real terms on regular pay - positive, barely. The split matters far more than the average: public sector regular pay is running at 5.5%, flattered by the timing of this year's awards and due to wash out over the coming months, while the private sector - the part the Bank actually watches for second-round effects - is at 2.9%. Private pay at 2.9% is, for my money, the single most disinflationary number in the entire week's data, and comfortably consistent with the 2% target once you allow for trend productivity. One footnote of near-silence: 26,000 working days lost to disputes in May, a fraction of what the winter's doctor strikes were costing. So: a labour market whose stock measures have stopped deteriorating and arguably begun to mend, whose flow measures still leak gently, and whose price - private sector pay - is behaving exactly as the doves would wish. File all of that for Thursday's MPC meeting, and note the tension with what the Agents' pay survey says about 2027, which we will get to in the Deep Dive.
OK. Inflation. And a pleasant surprise, with an asterisk the size of a supertanker. CPI came in at 2.6% for June, down from 2.8% and below the 2.7% consensus - the lowest reading since March 2025. CPIH, the ONS's preferred measure including owner-occupiers' housing costs, eased to 2.8% from 3.0%. The driver was overwhelmingly fuel: diesel fell 10.7p a litre on the month to 176.4p and petrol fell 2.1p to 155.3p - the first monthly declines at the pumps since the Middle East conflict began on 28 February - dragging transport inflation from 6.8% to 5.7% and the motor fuels component from 24.6% to 21.3% year on year. Domestic heating oil fell 20% on the month, and food made a further downward contribution besides. In other words, June's improvement is what happens when the oil market takes a breather: the post-ceasefire retreat in crude through June flowed straight to the forecourts and the June collection window caught it beautifully.
Underneath, the domestically generated half of the basket barely gave an inch. Core CPI held at 2.6% against a consensus that had it easing to 2.5%; services inflation slipped only from 3.7% to 3.6%, and the monthly services movement was actually a touch firmer than May's; goods inflation sits at 1.7%. So the entire downside surprise was imported, and the imported half is precisely the half that has since reversed - Brent's late-July charge back through $100 lands in the July and August prints, and the July Ofgem cap rise is feeding through to electricity and gas bills as we speak. Which is why I'd frame June as follows: it is below the Bank's own path - the June projections had CPI a little under 3% in Q3 and a little over 3.25% in Q4, so a 2.6% June is helpful ammunition for the doves and they will use it on Thursday - but it is ammunition manufactured in a lull that has already ended. The new Chancellor's VAT cut on electricity, worth around 0.1 points off CPI from October, is the government's contribution to the fight; you can judge the calibre of that weapon against a 10% weekly move in crude, and we will do exactly that in the Deep Dive.
The rental line deserves its own paragraph, as ever, because it is the one this readership lives on both sides of. The ONS's Price Index of Private Rents - the measure covering new AND existing tenancies, which is why it runs cooler and truer than the advertised-rents indices - held at 3.3% in the year to June, with the average UK private rent at £1,388 a month. The nations tell four different stories: England at 3.4% (average £1,446), Wales still running hot at 4.9% (£843), Scotland at just 1.3% (£1,012) - make of the post-rent-cap hangover there what you will - and Northern Ireland at 2.9% (£877). The headline writers called the national picture a stall, and after three years of far worse, 3.3% IS a stall. It is also, note, still comfortably above general inflation and above private pay growth, which means rents are still rising in real terms against tenant earnings - just no longer galloping. Squares neatly with Rightmove's Q2 tracker from last week: supply thinning again, demand steady, and the heat now in the stock rather than the price. For completeness on the international scoreboard: eurozone inflation is running at 2.9%, Germany 2.4%, France 2.0% - so Britain, for once, is mid-table rather than bottom of the league, and on the June print sitting below the eurozone average. Enjoy the sentence; I'm not sure how many weeks or months it survives.
Onto the PMIs, my darlings of the real time economy. And a proper upside surprise to close the week: the flash composite jumped to 52.1 from June's 49.3 - a three-month high and the first expansion reading since April. Services returned to growth at 51.8; manufacturing output surged to 53.6, a twenty-two-month high, with the manufacturing PMI itself at 52.8. Chew on the composition for a moment: manufacturing is currently growing FASTER than services in Britain, which is about as common as an honest asking price, and the drivers the survey names are exports to the US and Europe, supply chains feeding the AI and data-centre build-out, and defence spending - with manufacturers reporting their best order-book improvement since February 2022. There's a sentence with the new government's industrial strategy written all over it, and I'd expect to hear these numbers quoted from a podium before the month is out. Services got a lift from the World Cup and the heatwave in hospitality - though respondents simultaneously grumbled that the same heat kept shoppers off the high street, because this is Britain and the weather is never right. Business confidence, for what surveys of sentiment are worth, hit its strongest since February.
Now the caveats, and there are three good ones, in ascending order of importance. First, employment fell yet again - the compilers note private sector headcount has declined continuously since the Autumn 2024 Budget, a run now approaching two years, which squares precisely with the payroll data above: firms are producing more with fewer people, which is either a productivity miracle or a hiring strike, and I suspect rather more of the latter. Second, part of the factory upturn is explicitly precautionary - stock-building against Middle East supply disruption - which borrows demand from future months rather than creating it, and unwinds as surely as it builds. Third, and most important for the rate debate: the survey window ran from 9 to 22 July, almost entirely inside the oil-price lull, and the five-month low in input cost inflation the survey celebrates was built on exactly the fuel relief that has since reversed - Chris Williamson's own commentary conceded that Middle East worries flaring up in the closing days left the cooling in the price indices looking far from assured. His headline read was that the growth-plus-cooling-prices combination could strengthen the case for the Bank holding off from raising rates; I'd take the growth half of that at face value and hold the prices half very loosely indeed. A good print, honestly arrived at, and partially out of date before it was published. The construction PMI, incidentally, is not part of the flash and lands on 6 August - after seventeen consecutive months of contraction and one twitch of new-work growth in the May output data, that one remains the invalid of the family, and I'll believe its recovery when I see it. What a massive difference confidence makes - although the oil price is also rooted in reality, of course.
Gilty, or not Gilty? Gilty - and this week without even the redeeming intraweek shape I could offer you last time. Let me give you the levels first, then the story, then the decomposition, because all three earn their keep this week. The 5-year gilt closed Friday at 4.592%, up from 4.527% a week ago; the 30-year closed at 5.720%, up from 5.676%, having spent much of the week in the mid-5.70s; the 10-year traded back above 5% during the week. The 52-week ranges - 3.668% to 4.779% on the 5-year, 5.033% to 5.877% on the 30-year - put us camped in the upper reaches of both, well above this time last year. But the gilts are honestly the lesser story. The swaps, which price your mortgage far more directly, did something nastier: the 5-year SONIA swap printed 4.38% and the 3-year 4.34% as of Thursday's close, against 4.23% and 4.18% a week earlier. Fifteen and sixteen basis points in a week. A month ago the pair stood at 4.03% and 3.99%; a year ago, 3.66% and 3.58%. That is 35 basis points of mortgage-pricing pressure in a month and roughly 72 in a year, and the one-month chart is a staircase with no landings. I have spent half my week answering the same question in messages - "so what does Healey mean for my remortgage?" - and the honest answer is: less than the tankers do, but the two arrived together. Three-quarters of a percent on a 5.5% mortgage (where we were a year ago) is a 13.6% increase - let me know if you are achieving more rental inflation than 13.6%, I don’t expect the inbox to jump in volume on that one!
The story of the week, day by day, because the sequencing is the analysis. Monday: Burnham takes office and talks, within hours, of seeking "flexibility" within the fiscal rules - long yields spike towards two-month highs on his first afternoon in the job. Monday evening, after the close: the Chancellor announcement, and it is not the one the market had positioned for. Last week I reported the briefing that Shabana Mahmood was, in the words of one person familiar with the plans, nailed down for the Treasury, and that gilts had rallied on precisely that reassurance. Well. The person familiar with the plans turned out to be unfamiliar with the plans. Tuesday morning was therefore the Mahmood-reassurance trade being unwound with interest - fresh two-month highs across the curve, the 10-year through 5%, sterling handing back its gains - not because the market has any particular quarrel with John Healey, a former Defence Secretary and Treasury minister under Brown, but because it had pre-paid for one outcome and got another, and uncertainty always invoices twice. Wednesday brought the soft CPI print and a partial reprieve. Thursday brought $100 oil and took the reprieve back. Friday, with crude easing off the highs, yields ticked lower into the close - the 5-year fell 8 basis points on the day - which is the only reason the weekly changes look as “modest” as they do. Underneath the netted-off numbers, this was a week of proper two-way traffic, and the swaps, which carry the Bank-path expectation, finished it decisively higher. What you get in these situations - what you can absolutely take to the bank - is volatility, because uncertainty breeds volatility. Bond traders don’t like volatility.
Now the decomposition, which regular readers know I insist on when multiple culprits coincide - and which, pleasingly, the IMF has just endorsed as a discipline, of which more in the Deep Dive. Oil stories hit the short end and the belly of the curve: they are about inflation over the next one to three years and what the Bank does about it, and Thursday's charge through $100 did exactly that - it is the main reason a 3-year swap moved as much as the 30-year gilt. Borrowing stories disproportionately hit the long end: they are about how many gilts the market will be asked to absorb over a decade, and Monday's flexibility language plus Tuesday's public finances handed the long end plenty. On which: June's borrowing was the fourth-highest June on record; borrowing for the fiscal year to date stands at £57.6bn, already £2.7bn above the OBR's forecast track after just three months; and debt reached 94.9% of GDP, the highest since the early 1960s. Into that arithmetic dropped the new Chancellor's first act - scrapping VAT on electricity bills at a cost of £850m, funded, per the government, by cancelling the £1.8bn Digital ID programme - and his own colleague Darren Jones promptly pointed out that a three-year saving funding an ongoing giveaway is not quite the clean sum presented. Small beer against a £57.6bn quarter, but the long end grades on habits, not amounts - and the bond market, who won’t trust Burnham or Healey by default, are looking for “tells” and signals of how they will operate in reality (rather than how they talk). One more structural marker worth logging: the 5-year swap at 4.38% now sits just 21 basis points below the 5-year gilt at 4.59%, a gap that was closer to 30 a week ago and has run at 35+ for some time. This really isn’t a good time for us to lose that discount. The market still prices the medium-term path of Bank Rate below the government's cost of term funding - the quiet vote of no confidence in the fiscal arithmetic I have been banging on about for months - but the gap narrowed this week from the uncomfortable side: rate expectations rising towards the fiscal premium, rather than the premium falling towards the rate path.
What does it all mean in practice? For mortgage pricing: pressure, plainly. Fixes are priced off swaps, swaps are 35 basis points above where they were a month ago, and lender margins were already thin - the best 5-year money was sitting around the 6% mark for limited company borrowing as of last week's survey of the market, and if the curve holds here I would expect drift upwards over the next fortnight rather than down. I’ve moved my forecast for interest rates payable on deals to be refinanced in a few months time (i.e. new deals) to 6.25%.
I would not be waiting on a better rate before Thursday, and anyone mid-application might sensibly ask their broker about rate-lock terms this week rather than next. Because Thursday IS the main event: the MPC announces at midday, a hold at 3.75% is overwhelmingly priced, and the entire information content is in the vote split and the statement language. June was 7-2 - Greene and Pill dissenting for 4.00%, the hawk camp having doubled from April's lone Pill. The question Thursday answers is whether soft June CPI and 2.9% private pay hold the camp at two, or whether $100 oil recruits a third. My call, hedged as ever and worth what you paid for it: 7-2 again, on the logic that the Committee saw the June CPI undershoot its own forecast and will want August's full projection round before anyone new jumps ship - but a 6-3 would (probably) put another 5 to 10 basis points into the short end of the swap curve by teatime, and the paragraph about energy prices in the statement will move markets more than the arithmetic of the vote. As usual, in reality it will depend what the economic consensus before the meeting is, and what level of conviction there is in that prediction. I’d bet 6-3 right now, with 5-4 to hold being a live runner too. Watch, as well, whether they say anything about the fiscal handover; they won't want to, and the absence will be its own answer. Thursday also brings Nationwide's July house price index, Wednesday the Bank's Money and Credit release (mortgage approvals - the forward gauge of everything Chris measures six weeks later), and Friday the HMRC transaction count. Clear the diary; next week's Macroscope writes itself, and I suspect it will need the space.
So to the Deep Dive, and where are we going this week? Four places, and they join up more neatly than most weeks manage. First, the new government's own words - Burnham on the step of Number 10 and Healey's first address to the Treasury - because when the ideology changes, you read the primary sources, not the sketch writers, and I have read both speeches more than once so that you don't have to. Second, the IMF's assessment of the gilt market, which arrived days before the handover and amounts to the bond market's institutional memory written down in official prose - if you only ever read one piece of IMF output in your life, I'd nominate this one. Third, the Bank of England's Agents' summary, published Friday: the field notes on the economy this government has actually inherited, distilled from thousands of business conversations by the Bank's oldest intelligence network. And fourth, the JLL Missing Middle report on London's rental market, which I trailed last week and which lands directly in the part of the market where many of us operate. Notice the shape of the four: a government that wants to be believed, a market that prices belief by the basis point, an economy that has quietly stopped hiring, and half a million renters the market no longer serves. The connections between them are, I'd argue, the real content this week. Onwards.
Dive 1: The First Speeches - Burnham at the door, Healey at the Treasury
Primary sources, then. Burnham's first address outside Number 10 on Monday, and Healey's first speech to Treasury staff in the days that followed - the fullest statement so far of what this government thinks it is for. I'd encourage you to read both in full; failing that, here is my close reading, with my thumb on no scales other than the usual ones.
Theme 1: The five priorities, read closely
The Summary: Healey set out five priorities to Treasury staff, in order: first, fiscal discipline - describing fiscal credibility as the bedrock of economic stability and national security, committing to meet the fiscal rules, and stating that he and Burnham had agreed to do so "in lockstep", with a buffer for uncertainty. Second, growth in every postcode, with every government department described as a growth department and the fullest use of public investment within the fiscal framework. Third, "Backing Britain": British procurement by design rather than where possible, across transport, energy, defence, AI and tech. Fourth, wealth creation - government commitments to build confidence, investment, innovation and profit in British businesses, with a direct pledge to those with a bright idea or a small business seeking growth: "I will back you." Fifth, making life more affordable, alongside what he called a new era of devolution and public control. He framed his own history explicitly: a Treasury minister who left in 2008/9 as the financial crisis hit, describing the austerity and stagnation that followed as still driving public pessimism today. Burnham's parallel first-week actions: the VAT cut on electricity bills, a £2 bus fare cap, business rates relief for pubs, clubs and live music venues, and a pledge of a ten-year national plan by year end.
The Propenomix Perspective: Read lists like this the way the market does: the order IS the message, because everything in politics is rationed and the first slot is the scarcest resource there is. A government elected internally on the promise of being to the left of its predecessor, led by a self-described socialist, has produced an opening document whose first word is, in effect, "discipline" - and whose growth, procurement and affordability ambitions are all explicitly subordinated to the fiscal framework in the very sentences that announce them. There are two available readings and I'll give you both. The traditional one: the Treasury has captured its new tenant inside a week, as it captures them all - there is decades of precedent, and the building's win rate against incoming radicals is close to unbeaten. The kinder one: this is a government that watched the gilt market's May and July episodes from opposition, watched two rounds of headroom evaporate under its predecessor, and concluded before arriving that it has no permission slip for anything else. I lean towards the second, not because I'm feeling generous but because of one word and one clause. The word is "lockstep" - Chancellors do not usually volunteer, in their first address, that they have pre-agreed the fiscal stance with the Prime Minister, and doing so is a deliberate answer to the market's oldest question about Labour governments, which is whether Number 10 will spend what Number 11 promises to save. The clause is the buffer for uncertainty - after two years in which the operative fiscal number was a sliver of headroom that vanished twice, building slack into the rules on day one is the single most market-literate commitment available, and it costs him political capital with his own side to make it, which is precisely why it carries information. Now the tension, because there is one and I'd be doing you a disservice to smooth it over: Burnham himself, on Monday, within hours of taking office, spoke of seeking flexibility within those same rules - and the long end of the gilt curve moved on the word, as I covered in the Macroscope. So week one gave us Number 10 saying flexibility and Number 11 saying lockstep and buffer, and the spread between those two vocabularies is, for my money, the single most important thing to monitor in British politics between now and the Budget. If Healey's language wins, the term premium grinds down and everyone's remortgage gets fractionally cheaper; if Burnham's does, we have all been warned. "Growth in every postcode", for completeness, is levelling up with the serial numbers filed off - Johnson had it, Starmer kept a version - and I'd gently note that neither moved the regional needle much, because the constraint was never the slogan. And I'll flag the phrase that got less attention than it deserved: "public control", sitting quietly at the end of priority five. Nobody has defined it yet. In a housing context, it could mean anything from more devolved planning powers to acquisition programmes of the kind I have argued for, to things I'd argue against with some vigour. Undefined words in founding documents are where governments store their optionality. Remember Burnham wants stronger CPO powers for private properties that are of the lowest standards or breaching HHSRS checks - although he hasn’t addressed the elephant in the room on that one, which is that social housing has the lowest standards of all when it comes to damp, mould and outstanding repairs. Square that circle, man of the people. Watching with interest.
Theme 2: The watering can and the forest fire
The Summary: The government's flagship first-week cost-of-living measure removes the 5% VAT rate on household electricity bills from 1 October, running to April 2027, at an estimated cost of £850m in 2026-27 and a saving of roughly £42-£45 per household over the period at current price-cap levels. The government states it is funded by cancelling the Digital ID programme, budgeted at £1.8bn over three years; former Treasury minister Darren Jones has publicly questioned whether the measure is fully funded on that basis. External analysis puts the mechanical effect on CPI at around minus 0.1 percentage points. The measure arrived in the same week that Brent crude rose approximately 10% to trade above $100 a barrel, with the motor fuels component of CPI already running at 21.3% year on year before the latest escalation, and the July Ofgem price cap increase feeding through to household bills now.
The Propenomix Perspective: I have been trying to find a fair way to say this all week, and here is my best attempt, with the arithmetic shown. The policy is worth about 0.1 points off CPI and £42 to £45 per household spread over eighteen months - call it 60p a week to be generous. The problem it is aimed at, energy-led inflation, was moving in weekly increments that swamp that number: crude alone added roughly 10% in five trading days, and the pass-through from crude to the forecourt to the CPI transport division is measured in whole percentage points, as June's print demonstrated in reverse when a single month of falling fuel dragged the entire national inflation rate down 0.2. A watering can, deployed against a forest fire - the framing is mine and I'll stand behind it. But let me argue the other side properly, because there is one. If you are going to spend £850m on cost-of-living relief, taking tax off a price-capped essential that every household buys, at every income level, with zero administrative machinery and zero fraud surface, is about as clean as the genre gets - compare the tens of billions the Energy Price Guarantee swallowed in 2022-23 for the same headline instinct, and this is almost fiscally quaint. It is also, mechanically, honest relief: the cap is set inclusive of VAT, so the cut flows straight to the bill rather than into supplier margin. The policy's real function, I suspect, is not economic but grammatical - it lets the new government say "we acted on bills in week one" in every interview between now and the Budget, and in politics the sentence is often the product. My sharper concern is the one Darren Jones put his finger on, at some cost to his own career prospects one imagines: paying for an ongoing-flavoured giveaway with a one-off, three-year programme cancellation is precisely the fiscal habit that priority one was written to preclude, and the bond market noticed the discrepancy within hours - habits, not amounts, are what the long end grades. Week one, small numbers, no lasting damage. But here is the sentence I'd have preferred to hear, and which - to be fair - Healey's speech comes closer to than any front bench has managed in years: we cannot do much about the level of your bills while there is a war on; here is a gesture of good faith while we fix what we can actually control. Governments that can say that out loud tend to be trusted with the bigger decisions. Trying, but messaging - and the gilt curve is marking the homework in real time. Some of us still remember when Rachel Reeves came in and lambasted the previous government for not costing in measures that they had announced - and ironically, it seems she slipped straight into exactly the same working practices having denounced it so audibly when she was in number 11.
Theme 3: The olive branch to the wealth creators
The Summary: Priority four commits the government to fostering confidence, investment, innovation and profit in British businesses, with Healey directly addressing those with a bright idea or a small business who want to grow: "I will back you." The Backing Britain procurement priority directs public spending towards British suppliers by design across transport, energy, defence, AI and tech. No tax policy was announced; the autumn Budget will be the new government's first fiscal event, inheriting the previous administration's measures including the property levy on homes over £2m and the two-percentage-point dividend tax rise announced last November.
The Propenomix Perspective: "Profit" is not a word that appears by accident in a Labour Chancellor's founding list - these texts are combed by more advisers than they have sentences - so its presence is a choice, and I want to give the choice its due before I test it. Because here is the uncomfortable inheritance the warm words sit on: the last Budget raised dividend taxation by two points and introduced a levy on £2m-plus properties, and the small business owner Healey is addressing pays herself in precisely the instrument that just got more expensive. So the olive branch is extended by a government whose immediate predecessor - same party, same benches - spent the autumn pruning the tree. What would make me believe priority four is a priority rather than a paragraph? Three tests, in ascending order of difficulty. Test one: the autumn Budget declines to ratchet further - no third bite at dividends, no broadening of the property levy, no CGT surprise. This is the cheapest test and even passing it would distinguish this government from the recent trend. Test two: "backing small business" turns out to include the sectors this government finds unfashionable - the SME housebuilder being squeezed out of a consolidating industry (the Bank's agents will have more to say on that in Dive 3), and yes, the professional landlord supplying the mid-market rental stock we will get to in Dive 4. It is easy to back a robotics start-up in a press release; the test of a principle is backing the businesses your activists dislike. Test three, the hardest: when the fiscal arithmetic tightens - and with debt at 94.9% of GDP and £100 oil it will tighten - resisting the temptation to redefine "wealth creators" narrowly enough that the people actually creating the wealth land outside the definition. I have watched that semantic manoeuvre performed by governments of both colours, and it usually starts with the word "genuine" being inserted before "wealth creators" in speeches. On Backing Britain, one honest question rather than a verdict: procurement preference by design is industrial strategy with real teeth, and the PMI data this very week shows manufacturing answering exactly this kind of call - but preference has a price, paid by the taxpayer in the spread between the British bid and the best bid, and nobody has yet said what spread is acceptable. That number, when it emerges, will tell us whether Backing Britain is a strategy or a slogan. I'd rather have this speech than its opposite, and I mean that without irony - the churn in policy, which I have argued for years is more damaging than any individual policy, at least pauses when a government commits publicly to backing the productive economy. Watch the actions, not the adjectives. The Budget is the exam, and it is now the exam for priorities one and four simultaneously, which is precisely what will make it hard.
Dive 2: The IMF on the Gilt Market - the bond market's memory, in official prose
The IMF's latest UK assessment landed in the days before the handover, and one section of it deserves to be laminated and pinned above the new Chancellor's desk: the analysis of what the September 2022 “lettucepisode” did, permanently, to the market that funds the British state. I'll take it in three movements: the scarring, the ownership, and the prescription.
Theme 1: The scarring is structural, not cyclical
The Summary: The IMF finds that the September 2022 gilt market turmoil - the mini-Budget episode that ended the Truss government inside 44 days - "marked a structural shift in the fragility of the gilt market", describing a regime shift in how the market treats UK fiscal policy. The assessment states that policy credibility and predictability are key to strengthening market confidence and reversing the impact of the September 2022 episode - phrasing which implies that nearly four years on, that impact has not been reversed.
The Propenomix Perspective: Let me translate the finding into money, because that is where it lives. When you lend to a government for thirty years, part of the yield you demand is simple rate expectation - where will Bank Rate average over the period - and part is term premium: the extra you charge for the risk that the borrower does something unpredictable before you get your money back. What the IMF is saying, in its careful multilateral prose, is that September 2022 permanently repriced the second component for Britain. Not "raised it for a while". Marked a structural shift. And notice what "structural" means in practice, because it is the load-bearing word: cyclical damage mends with the passage of time, structural damage mends only with the accumulation of evidence - year after year of the borrower being boring - and resets, at least partially, with every fresh wobble. Trust in a bond market behaves like trust anywhere else: destroyed in an afternoon, rebuilt by instalments, and the instalment schedule does not accept lump sums. Here is the part I find arresting: one government, in office for 44 days, four years ago, is still levying a charge on every fixed-rate mortgage written in this country - because the swap curve your lender prices from hangs off the gilt curve, and the gilt curve carries the premium. Nobody can tell you precisely how many basis points of your fix is Truss premium - anyone who claims a precise decomposition is selling something - but the IMF has now stated, as institutional fact, that the level is elevated and the cause is credibility. Regular readers will enjoy the small historical rhyme: the IFS titled its pre-Budget bond market analysis with Denis Healey's first law of holes, I quoted the same law in these pages a fortnight ago while the Chancellor race ran, and the vacancy has now been filled by an actual Healey, who inherits a hole with officially certified steep sides. Is it fair that the whole country pays for 44 days of 2022 indefinitely? Fair doesn't come into it - markets are not moral philosophers, they are pricing machines with long memories, and the memory has just been peer-reviewed. The practical read-through is the one I keep returning to: the path back to cheaper fixed-rate money runs through inflation, yes, but it runs equally through years of fiscal dullness, and every flexibility-within-the-rules, every not-quite-funded gesture, pushes the repayment date out. Dullness is not the absence of a strategy. At current prices, dullness IS the strategy. This summarises why I get SO upset when someone tries to mount a defence of Liz, citing that the “blob” conspired against her, or whatever strawman argument they choose to invoke.
Theme 2: The 60-90% problem, and the fast money
The Summary: The IMF estimates that global factors accounted for between 60% and 90% of the variation in UK gilt yields between 2020 and 2026, and notes that foreign investors now hold approximately 31% of UK government debt outstanding. It characterises this investor base as more price-sensitive and quicker to exit than traditional domestic holders such as insurers and pension funds, leaving UK borrowing costs increasingly exposed to shifts in global risk appetite, US monetary policy and commodity prices regardless of domestic fiscal decisions. The Bank of England's MPC has separately noted the growing role of overseas investors in driving UK yield movements.
The Propenomix Perspective: This is the finding I would set as an exam question for every commentator who has ever written "gilt yields rose today because of [insert domestic villain]" - and I include my own trade in that, because the temptation to narrate every move as a verdict on Westminster is professional gravity and most succumb. If 60% to 90% of the variation is global, then on most days the cost of money in Britain is being set by the Fed, the oil price and the world's appetite for duration, and the domestic contribution operates at the margin. Two consequences follow, and they pull in opposite directions, which is why both are worth holding at once. The comforting one: most of what happened this week was not a referendum on John Healey - the oil hand moved curves everywhere with an energy import bill, and pretending otherwise flatters Westminster's importance. The uncomfortable one: the margin is precisely where the term premium lives, and the composition of the register has changed underneath it. A gilt market owned by British pension funds and insurers was a gentlemen's club with nowhere else to go - they bought duration because their liabilities demanded it, in size, in all weathers. A gilt market that is 31% foreign, and tilting towards what the trade calls fast money - relative-value funds, hedge funds, holders with no structural need to own Britain at all - is a market where the punishment for domestic error arrives at keystroke speed and travels further, because the marginal buyer can simply decline to show up. We saw the domestic version of forced selling in 2022 when the LDI machinery seized; the imported version needs no leverage blow-up, just a better relative offer somewhere else. So the asymmetry runs like this, and it is the whole game: you can do everything right and still be repriced by a Houthi drone, and you can do one thing wrong and be repriced by the entire planet simultaneously. Global factors set the weather; domestic credibility decides whether you have a roof. And I'd draw the chain one link further than the IMF politely does, back to the Bank's Financial Stability Report we dived into a fortnight ago: five million households refinance onto new rates in the coming few years, every one of them pricing off a swap curve that hangs off a gilt curve whose marginal buyer is now a fund in Connecticut with no particular affection for Britain. That is the transmission mechanism from geopolitics to a kitchen table in Wolverhampton, in four links, and it is why I put so much effort into decomposition every single week - if you cannot tell which hand moved the curve, you cannot tell whether to blame Riyadh or Westminster, and you will position wrongly. The IMF has now, pleasingly, made my weekly habit official doctrine.
Theme 3: The prescription, and the irony
The Summary: The IMF's stated remedy is that policy credibility and predictability are the key tools available to the UK for rebuilding market confidence and reversing the 2022 regime shift. The report's publication coincided with the arrival of a Prime Minister who said in September 2025 that Britain must get "beyond this thing of being in hock to the bond market", and whose first-day comments on seeking flexibility within the fiscal rules were followed by 10-year yields moving back above 5% and 30-year yields reaching two-month highs.
The Propenomix Perspective: Which brings us back to Carville, and the reason he leads this week's edition. Every incoming leader of a heavily indebted democracy has the moment - usually early, always rhetorical - where they declare independence from the bond market. Burnham had his ten months ago with the "in hock" line, and I'd note the line was popular, because it flatters a real frustration: why should elected governments defer to unelected creditors? The answer arrived on Monday afternoon, inside his first six hours in office, in the form of a tutorial nobody enrolled him on: one word about flexibility, a two-month high in long yields, and by the end of week one a Chancellor delivering a speech that reads, in places, like it was co-written by the Debt Management Office. I don't say that mockingly, or not entirely - absorbing the lesson at speed is exactly what the IMF's prescription demands, and the speed of absorption here was impressive by historical standards; some governments take a full crisis to learn it and one recent government never did. The deeper point deserves spelling out, because it is the cheapest free lunch in public finance and almost nobody orders it: predictability costs nothing this year, scores nothing against the fiscal rules, requires no legislation, and compounds - every quarter of boring behaviour retires a sliver of the Truss premium, which cuts debt interest, which creates the very headroom the activists want spent. Dullness literally pays for radicalism, eventually, if you can just sit still long enough - and there is the rub, because this government's internal coalition was assembled on the explicit promise of doing MORE, and asking it to bank four years of doing less, predictably, so that the reward arrives in the next Parliament, is asking politics to run on a maturity mismatch. The bond market lends long; political capital is strictly short-dated paper. Whether Burnham can refinance the one with the other is, I'd suggest, the actual question of this premiership, and everything else - housing, growth in every postcode, public control, all of it - is downstream. What would I watch as the tell? Not the Budget speech, which will be crafted for the gallery. The gilt remit that accompanies it - the DMO's dry little document setting out how much will be issued, at what maturities, in what mix. The market reads the remit the way the clergy read encyclicals: nobody quotes it on the news, and it moves more real money than anything said at the despatch box. We'll see. In the meantime, if you want to know who governs Britain, Carville answered it thirty-three years ago, and this week's syllabus confirmed the appointment.
Dive 3: The Bank of England Agents' Summary - field notes from the economy Burnham inherits
Published Friday, and my favourite regular under-read document. A word on why it earns that status: the Agents are the Bank's oldest intelligence network, a dozen regional offices whose staff sit across the table from thousands of businesses a year, and their summary is the closest thing the MPC gets to the economy without the statistical lag - anecdote, yes, but anecdote gathered at industrial scale by trained listeners, and considered formally at the July meeting. One crucial timing note before we start, because it frames everything: the intelligence was gathered in the six weeks to end-June - before the ceasefire's collapse, before oil's charge back through $100. This is a photograph of the economy in the lull, not the flare-up, which is exactly why it pairs so instructively with Friday's PMI (window: 9 to 22 July). Two instruments, two windows, one economy perking up precisely as the ground shifted under it. It’s the very best insight we get into what business says to the Government (they say a lot more, but that’s private comms, of course).
Theme 1: Subdued, squeezed, and selective about who gets credit
The Summary: Agents report continued subdued growth in private sector activity, with business confidence having weakened progressively and any recovery expected to translate only gradually into activity. Most firms report squeezed profit margins, with a general acceptance that margin rebuild will take longer than previously thought. Investment intentions are broadly flat, with construction and property firms among those least likely to invest. Credit is available but banks are selective, preferring larger existing clients, with less appetite to lend to small and medium-sized firms, to the construction and hospitality sectors, and - notably - to firms judged at risk of revenue erosion from AI, pushing such borrowers towards second-tier funders. Borrowing appetite is weaker than available supply, with more firms preferring internal funding or operating debt-free at current rates.
The Propenomix Perspective: Two lines in this section stopped me cold, and I want to take them in turn because each is a small landmark. The first: banks declining to lend to firms "at risk of revenue erosion from AI". As far as I can tell - and I have looked - that is the first appearance of AI exposure as a credit criterion in an official UK publication, and sit with what it means: your business model's vulnerability to a language model is now, formally, an input to whether you can borrow. Not your accounts, not your covenant history - a lender's guess about whether software eats your revenue line. The second-order effect is the interesting one, and it is vicious: a firm flagged as AI-vulnerable gets pushed to second-tier funders at second-tier pricing, which raises its cost base, which weakens it, which makes the original judgement self-fulfilling. Credit rationing has always worked this way, but I cannot remember a technology being priced into it this early in its own adoption curve, and I'd nominate this single line as a future Deep Dive all of its own. The second stopped-me-cold item: the avoid list. SMEs, construction, hospitality. Regular readers will connect this straight to the planning consolidation thesis we built in June, where the data showed the SME housebuilder being squeezed out of the delivery system by process; here is the credit channel performing the same surgery from the other side. The large get competing term sheets and expanded facilities; the small get pushed to expensive money or no money; and consolidation proceeds not by anyone's decision but by financial gravity - which is how the deepest structural changes always travel, quietly, in the machinery of term sheets rather than the theatre of policy. Note, too, the demand-side detail that undercuts any simple credit-crunch story: borrowing appetite is WEAKER than supply. Firms are choosing not to borrow at these rates - internal funding, debt-free operation, balance-sheet hibernation. An economy where the marginal business project cannot clear a hurdle rate built on a 4.38% swap is an economy running below its potential on purpose, and it is the most eloquent single argument for why the cost of money, not the availability of it, is the binding constraint. For this readership, I'd draw the practical conclusion plainly, and yes, it rhymes with October's workshop theme because the logic is the same logic: when credit flows preferentially to scale, the rational responses for those without scale are to partner, to acquire, or to become the acquisition - and the people who choose among those three deliberately will fare better than the people who have the choice made for them. Remember SMEs employ 90% of the private sector workforce. Good luck on the 1.5m homes with this sort of outlook towards construction lending too!
Theme 2: Property on the ground - flat prices, fragile nerves, and the tracker migration
The Summary: Property market sentiment remains weak, attributed to high borrowing costs, geopolitical uncertainty and affordability and viability challenges. Housing market confidence is described as fragile among both buyers and sellers, with transactions taking longer to complete; house prices are flat in most areas and falling in others, with the top end particularly weak. Contacts consider a second-half pickup dependent on reduced uncertainty and lower mortgage rates. First-time buyer enquiries have fallen while remortgage volumes hold steady, and more borrowers are choosing variable, tracker or short-term fixed products, citing uncertainty over near-term rates and pressure on budgets. New residential development in London has fallen sharply, with housing starts moderating elsewhere; developers report they can only maintain prices via increased incentives and generous part-exchange offers, and expect a three-to-six-month lag between any return of confidence and on-site activity. Commercial demand is concentrated in Grade A city-centre offices.
The Propenomix Perspective: If you have been reading the last month of Supplements, this section is the Bank's field network quietly marking our homework, and I want to make the triangulation point properly because it is the closest thing this trade offers to proof. We now have four instruments built on entirely different principles describing the same market: Chris's portal data (fast, asking-price-led, exhaustive), Rightmove's index (listing prices, national), Molior (six hundred London sales offices interviewed quarterly), and now the Agents (business anecdote at scale). Watkin says a 50.8% exchange ratio and a vanished lead over 2024; Rightmove says the biggest July asking-price cut in a decade; Molior says 589 individual buyers in a quarter; the Agents say fragile confidence, elongating transactions, prices flat-to-falling. Four methodologies, four blind spots, one picture - and when instruments that fail in different ways agree, the measurement errors cancel and you are looking at signals. The market is grinding sideways with a soft underbelly at the top end, and that is now established fact rather than commentary. Within the section, two details deserve close reading. First, the phrase "maintain prices via increased incentives and generous part-exchange" - hold that up to the light and admire what it admits: achieved prices, the real ones, are falling, while headline prices, the ones the indices ingest, are held flat by giveaways that no index captures. Stamp duty paid, flooring throughout, a part-exchange valued kindly - none of it appears in a price series, all of it appears in the economics. I have banged this drum before and will again: in new-build especially, indices measure the sticker, not the deal, and anyone using new-build comparables for refinancing valuations or purchase decisions should mentally deduct the incentive package before believing the number. Second, the tracker migration, which I'd call the most consequential household behaviour shift in the report. More borrowers floating - variable, tracker, short fixes - is individually rational: the curve prices the year-ahead rate above today's, most forecasters still believe the next sustained move is down, so why lock the local peak? But aggregate it across the cohort and remember the Financial Stability Report from a fortnight ago - five million households refinancing over the coming few years - and you realise what has been assembled: a very large, very synchronised bet that the Middle East resolves before the Bank is forced hawkish. If that bet is right, the floaters harvest the cuts the moment they arrive. If $100 oil recruits a third MPC hawk and then a fourth, the same cohort takes the repricing in real time, with no fix to hide behind, at scale, simultaneously. I am not a broker and product choice is circumstance-specific - but I would say the decision to float in July 2026 is a geopolitical position at least as much as a financial one, and it should be held by people who know that is what they are holding. Last observation, on the supply side: the three-to-six-month lag between confidence returning and boots on site means that even in the best case - rates ease, uncertainty clears tomorrow - nothing recovers on the ground before spring 2027. The Grade A-only commercial detail completes the picture: secondary offices are becoming economic orphans, which, for those of us who watch the commercial-to-residential conversion pipeline, is not entirely bad news - one market's obsolescence is another's feedstock, at the right basis.
Theme 3: The 2027 pay question, and the machines in the margins
The Summary: The weighted average 2026 pay settlement remains at 3.5%. Asked what CPI running above 3% at year-end, rather than around 2%, would mean for 2027 settlements, the majority of contacts able to respond indicated settlements 0-1 percentage points higher than previously planned - implying 2027 settlements broadly in line with 2026 and little to no pay disinflation next year - though some cited margin pressure, a looser labour market and weak demand as offsetting restraints, and National Living Wage-affected and unionised employers continue to expect above-inflation awards. A special section on AI adoption reports productivity gains concentrated where skilled staff validate AI output; reduced demand for entry-level and junior roles, including reduced graduate recruitment; new frictions from low-quality AI-generated content; data-centre expansion constrained by grid connections, semiconductors and skills shortages; and early signs of firms moving from time-based to fixed-fee pricing, potentially altering the relationship between wages and prices in parts of the economy.
The Propenomix Perspective: The 2027 pay survey is, for my money, the most important paragraph the MPC will read before Thursday, and the reason is the construction of the question, which rewards a close look. The Bank did not ask employers what they expect - expectations surveys are ten a penny and famously soft. It asked a conditional: IF inflation is back above 3% at Christmas, what happens to your 2027 settlements? And the majority answered: we add up to a point. That is not a forecast, it is a pre-commitment - the second-round effect, the wage-price feedback loop that every disinflation depends on suppressing, surveyed in advance and found to be armed. Now put it next to Tuesday's labour data and you have the Bank's entire dilemma in two numbers: private sector pay TODAY is 2.9%, target-consistent, the best argument for patience on the Committee; conditional pay NEXT YEAR is 3.5-to-4.5% if oil keeps CPI above 3%, the best argument for pre-emption. And the bridge between the two numbers is a tanker lane in the Red Sea. This, incidentally, is why I said in the Macroscope that Thursday's statement language on energy will move markets more than the vote arithmetic - the Committee is not really deciding a rate, it is deciding which of those two numbers to believe, and the survey has just told them the second one has employer sign-off. On the AI section, I'll make the property-relevant observation first and then confess an uncertainty. Property-relevant: the erosion of entry-level and junior roles that the Agents describe - graduate recruitment down, the career ladder's bottom rungs being sawn off - lands hardest in precisely the office-based sectors whose 22-to-30-year-olds fill the city-centre flats, the co-living schemes and the HMOs of this country. Hold that thought for sixty seconds, because the next Dive prices the same cohort out of London from the housing side, and the two reports together describe a generation squeezed from both ends of the same corridor. And one small delight I refuse to pass over: the Bank of England's Agents have officially recorded the phrase "AI slop" as a business friction, which means it is now, in some meaningful sense, part of the monetary policy information set. The confession of uncertainty: the fixed-fee pricing shift the agents flag - firms abandoning time-billing because AI collapsed the hours - is quietly the most radical line in the document, because our entire mental model of services inflation runs through wages-per-hour into prices, and if the hour stops being the unit of account in chunks of the professional economy, the transmission mechanism the Bank steers by is being rewritten mid-voyage. Where does that land? I don't know. I'm not sure anyone does, including the people writing it down. But I'd rather track it here weekly, in public, than be surprised by it - and I suspect we will be returning to this box for years.
Dive 4: JLL's Missing Middle - the London rental market's hole where the workforce should live
Trailed last week, and worth the wait. JLL's research team has put numbers on something everyone operating in London's rental market has felt for years: the market has stopped serving the middle of its own demand curve. This one lands closest to home for many readers, so I'll take my time, argue with it a little where it deserves arguing with, and finish with where I'd put my own chips.
Theme 1: The arithmetic of exclusion
The Summary: JLL reports that since 2015, London rents have grown at approximately three times the rate of entry-level salaries, and that 90% of young professionals aged 22-39 cannot afford to rent a home alone in the capital. One in three London businesses report housing costs as a significant barrier to recruiting junior staff, with growing numbers relocating functions out of London as a direct result. The report frames the issue explicitly as a competitiveness problem: a city whose economic model depends on attracting and retaining talent is pricing out the workforce that sustains it.
The Propenomix Perspective: Let me do something slightly unusual and interrogate the headline number before I deploy it, because the 90% deserves a fair hearing rather than a gasp. Renting ALONE is, historically, a high bar - flat-sharing has been the entry product of London housing for generations, and my own first years in this game were spent around shared houses precisely because that is how young adults have always afforded cities. So a purist could object that the 90% measures the wrong thing. Here is why the objection fails, and why the number survives its own scrutiny: first, the trend is the indictment, not the level - rents growing at three times entry salaries for a decade means the bar is receding from the cohort at speed, whatever height you set it; and second, the sharing escape valve is itself the product being squeezed, as we'll see in Theme 3 - if the answer to "I can't rent alone" is "share, then", policy has spent fifteen years making the shared house harder to supply too. Close both exits and the 90% stops being a statistical curiosity and becomes a wall. The reframing JLL gets exactly right is competitiveness: this is a labour-market story wearing a housing costume. When one in three employers names housing as a recruitment constraint, the housing market's failure has migrated onto company balance sheets - Andrew Carter's line, which I quoted back in February, was that the housing shortage is a tax on the whole economy, and JLL has now itemised the invoice, employer by employer. Function relocation is the part I'd watch like a hawk, because it is revealed preference rather than survey grumbling: firms moving actual departments to actual cheaper cities are paying real money to escape London's housing market, and unlike a survey response, a relocation doesn't reverse when sentiment improves. And now collide this Dive with the last one, because the two reports were published in the same week and describe the same cohort: the Agents say AI is thinning the junior roles from the demand side; JLL says housing costs are thinning the juniors from the supply side. A city that becomes simultaneously harder to get hired in and harder to live in, for the same generation, is running an experiment on itself: how long can an economy built on importing 25-year-olds keep repelling them before the model breaks? Cities do self-correct - London has reinvented its housing offer more than once, and I'd bet on it doing so again eventually - but self-correction needs supply, and supply, as Molior told us last week in brutal numerical detail, has an ignition problem.
Theme 2: A shrinking sector that only serves the top
The Summary: Government figures cited by JLL show the number of private rented homes in London fell 6% in the latest annual data, driven by regulatory changes and sustained landlord exits. New purpose-built supply, meanwhile, targets higher earners in order to remain financially viable: Build to Rent studios and co-living units in Zones 2-3 command rents between £1,500 and £2,800 per month, pricing out approximately half a million single renters who cannot access even the cheapest purpose-built rental homes. The result is what JLL terms a clearly defined market failure: a missing middle of young Londoners earning too much for social housing eligibility yet too little for much of the private stock within reasonable reach of work.
The Propenomix Perspective: Put this theme next to the last three weeks of Supplements and the mechanism assembles itself in front of you like a court exhibit, so let me assemble it, in order. Step one: the provider who historically served London's middle was the private landlord - the ex-council one-bed in Zone 3, the converted flat above the parade, the room in a decently run shared house. Step two: that provider has spent a decade being surcharged (the 3% SDLT loading), Section 24'd (taxed on revenue rather than profit, uniquely among businesses), and regulated borough by borough towards the exits - "deliberate policies of successive Governments", in Molior's phrase from last week, and I use their words rather than mine precisely because they are nobody's landlord lobbyist. Step three: the stock responds - down 6% in a single year, which for a sector of this size is not attrition, it is retreat. Step four: the replacement arrives, and here is the part that nobody intended but everyone should have predicted - institutional BTR is genuinely good at what it does, but run the developer's numbers under current build costs, land values, financing at the swap rates we discussed an hour ago, and affordable-housing requirements, and the only schemes that clear a hurdle rate are premium schemes. Viability maths doesn't have politics; it has a discount rate. So the replacement product enters at £1,500 to £2,800 a month, serving a different customer than the departed provider served, and the middle - JLL counts half a million single renters - falls between a landlord who left and a tower that wasn't built for them. Nobody designed that outcome. The middle vanished as the residual of a dozen policies, each aimed at something else, which is precisely why nobody owns fixing it. Two honest hedges before I rest the argument. First, the ledger has two sides: a portion of the departed landlord stock did not leave housing, it moved into owner-occupation, and the first-time buyer who got the keys is a genuine winner - the loss is concentrated on the renter cohort, which happens to be the cohort least represented everywhere decisions are made. Second, the ONS rental data we covered in the Macroscope shows national rent inflation stalling at 3.3%, and fairness requires saying so - but a stall at these levels compounds on a base that priced out the middle years ago; the fire has stopped spreading, the building is still burnt. Which brings me back to the argument I made about Burnham's social housing ambitions last week, now with JLL's numbers underneath it: the intelligent goal for an interventionist government is not to fight the remaining private landlords into the sea - that experiment is the last decade, and this report is its results section - it is to remove the NEED for half a million people to fight over the middle, and that is a supply project, not a redistribution project. Every pound spent making the existing shrunken stock change hands at a different price is a pound not spent on the only variable that has ever solved this: more homes, of the right kind, at the right price points. Helsinki, as we covered last week, planned its way there. It can be done. It is simply never chosen.
Theme 3: The three fixes, and where I'd put my chips
The Summary: JLL proposes three policy levers. First, site viability reform: with emergency measures having already reduced affordable housing requirements from 35% to 20%, the report argues for a franker conversation about permanently lower thresholds, on the basis that the current challenge is delivering any homes at all. Second, professionalising the HMO sector: with HMO numbers falling under licensing costs, compliance burden and landlord exit, JLL proposes tax reform, a single national licence for accredited operators, and a distinct planning use class to encourage purpose-built, professionally managed HMO stock at institutional scale. Third, compact studio models: 18-22 square metre urban studios with a bed, kitchenette, en-suite and communal kitchen access, delivered without expensive amenities at price points accessible to young professionals and key workers, citing precedent from Tokyo, Amsterdam and New York. The report frames mass-market rental for the squeezed middle as an investor opportunity: structurally high demand, low void risk, durable income.
The Propenomix Perspective: The HMO section is the one I'd co-sign loudest, and I say that as someone who has operated in and around this part of the market for a long time (but not in London), so discount me accordingly and then hear the argument anyway. The professionally run HMO IS Britain's actually existing affordable mid-market housing - not a stepping stone to it, not a poor relation of it, the thing itself, at rents the missing middle can actually pay - and policy has spent fifteen years treating it as a nuisance to be licensed into submission. Consider the machinery from the operator's side: licensing that varies borough by borough in fees, standards, and processing times, so that an operator with houses in three boroughs runs three parallel compliance regimes; planning treatment that shifts underneath you as councils roll out restrictions area by area; and a cost structure where compliance is substantially a fixed cost per property, which means - follow the incentive - it punishes the small compliant operator hardest, barely dents the large one, and touches the genuine cowboy not at all, since he wasn't applying for licences anyway. We have constructed, with real diligence, a regime that selects against exactly the operators we claim to want. JLL's package - a single national licence for accredited operators, a distinct use class, tax reform - would be quietly transformative, and the licence is the jewel: it converts compliance from a tax on scale into an enabler of it, gives institutional capital a legible asset class where today there is a postcode lottery, and - the part I'd emphasise to any minister listening - it raises standards precisely BY making scale viable, because the operators who invest in systems and staff are the ones a national accreditation rewards. Combat, not collaboration, has been my complaint about housing policy for years; this is what the collaboration version looks like, costed and on paper, from a research house with no landlord axe to grind. On the compact studios I am genuinely torn, so I'll argue both sides properly and tell you where I land. The case for: an 18-square-metre studio done well - and Tokyo has proven for decades that it can be done well, with design intelligence substituting for floor area - beats every real-world alternative the missing middle currently faces: the damp room at the end of a stranger's landing, the ninety-minute commute, the overcrowded share. Space standards that outlaw the small good home in favour of nothing at all are not protecting anyone; they are decorating a shortage with principles. The case against: "compact" is a word doing heavy lifting, and the distance between a Tokyo micro-flat and a 2040s slum is not the floor area, it is the build quality, the management, and above all the enforcement - and enforcement capacity is precisely what British councils, on current budgets, do not have. Flexibility plus weak enforcement is how you build the case studies that get flexibility banned again a generation later; I have watched that cycle run before. So my landing: yes to compact standards, but only welded to the accreditation regime from the HMO proposal - let the operators who earn the national licence build small, and keep the floor for everyone else. The two proposals are better as one policy than as two. On the third lever, permanently lower affordable thresholds - I'll simply observe that asking a Labour government, in year one, to entrench a cut from 35% to 20% affordable housing is asking them to take a very cold bath in front of their own supporters, whatever the viability spreadsheets say, and viability spreadsheets do not vote. I suspect that one waits, whatever its merits. And the investor coda, because the report is honest enough to include one and so will I be: mass-market rental for the squeezed middle is the deepest demand pool in UK residential - half a million people in London alone, structurally underserved, with void risk close to a rounding error - and much of the second-hand stock capable of serving it currently trades below replacement cost, which regular readers know has been my strategic anchor since I started taking this business seriously. The missing middle is a policy failure and an investment thesis simultaneously, and there is no contradiction in saying both out loud: the professionals who run compliant, decent stock at honest rents are the ones solving the failure retail while Westminster debates it wholesale. I'd rather we built the market that makes the whole argument obsolete. Until then, the queue is the signal.
Let’s drill down yet further. One very strange anomaly is the gap between the 37.5 square metre 1 bedroom flat and the 6.59 square metre HMO room. They can’t both exist as a meaningful number and be as far apart as they are. It’s a nonsense. Taking a sensible (London-centric if you prefer) approach to minimum space sizes is an absolutely key consideration for actually trying to solve this problem rather than just talking about it.
As we get towards the end for this week - I can't wait for our next workshop in Manchester in October. Joint Ventures and M&A with Rod Turner and myself: how to partner without ending up in litigation, how to buy portfolios and companies rather than single units, and - given what the Agents just told us about who gets credit and who doesn't - how to be on the right side of the consolidation that is visibly underway from the biggest developers down to the two-property partnership. The room is always half the value; the people booking early for this one are exactly who you'd want to sit next to. We've got an incredible venue and secured a superb sponsor for this one too - but all is under wraps at this stage. Book your tickets at: tinyurl.com/pbwoct26 to get your 20%+ Super Early Bird discount - and book a VIP dinner ticket if you want to grab some time with myself and Rod; at dinner, everyone gets a slot to discuss anything they want, we focus on what might be holding you back at the moment in your property business, but you can go as off piste as you want to!
Above all - please remember to Keep Calm, ALWAYS listen to or read the Supplement, and Carry On. A week that gave us a new Prime Minister, a surprise Chancellor, a tariff win measured in whisky, oil back over $100 and fifteen basis points on the swap curve - and yet the fundamentals we track every week have barely moved: too few of the right homes in the right places, a rental market with a hole where its middle should be, yields north of 7% against borrowing in the 4s for residential borrowers, and a million-listing sales market where half the vendors who leave, leave unsold. Governments arrive breathless; the constraints that govern them were all here last Tuesday. Position for the constraints, respect the breathlessness, and remember that investing in property is not a guaranteed win - it is a discipline, and disciplines compound. Thursday brings the Bank's decision and the vote split that matters more than the decision; we will be here next Sunday to make sense of whatever they do. There will be opportunities abound between here and 2030, and I'd rather we found them calm than breathless. KCCO!