Author: Stephanie Crawford

Introduction

This week, Centrus shared a briefing with our retainer clients analysing the implications of the recent Comprehensive Spending Review (CSR) for housing finance professionals.

With new clarity around rent standards, long-term grant funding, and access to the Building Safety Fund, the CSR marks a pivotal moment for housing associations to reset business plans, re-engage funders, and move forward with renewed strategic focus.

The sector faces both opportunity and expectation: to turn policy stability into tangible delivery amid ongoing market pressures.

We’ve published the full note — “Policy Stability to Delivery: Implications of the CSR for Housing Finance Professionals” — to help wider stakeholders understand what this means and how to respond.

📄 Download the full report below

If you’d like to discuss how this impacts your organisation’s plans or treasury strategy, please get in touch with Paul Stevens, Executive Director or John Tattersall, Managing Director.

Market update

• Since the last monthly update, the outlook for inflation and interest rates fell during late November but has since bounced back in December, with the 5 and 10-year swap rates back at 4%. Expectations are that businesses will pass on higher National Insurance and Minimum Wage costs and service CPI remains stubbornly high.
• Despite 3 of the 9 MPC members voting for a rate cut in December, the outlook for rate cuts in 2025 hasn’t moved much since last month, with two cuts expected in 2025.
• The strength of the US economy is another factor influencing the higher rate outlook, with UK gilt yields broadly tracking the higher US Treasury yields; the 30-year gilt is 5.1% as we release
  this update. 
• CPI rose to 2.6% in November from 2.3%, with transport costs the main driver. Service CPI held steady at 5.0%. Both readings were above the Bank of England’s expectations.
• Demand from investors remains, with bond spreads back to record lows helping to offset some of the rise in gilt yields. The gilt yield curve rises steeply from 4.6% at 13 years, highlighting the relative attractiveness of shorter-dated issuance.

Implications for clients

• The higher inflation outlook will moderately improve rent increase projections with September 2025 CPI currently projected at c. 2.5%, although a higher cost base is likely to more than offset this; most clients are describing the 2025/26 budget process so far as ‘challenging’.
• The higher long-term cost of capital makes investment decisions even more challenging, with Housing Associations facing the difficult choice between subsidising new development schemes and maintaining financial resilience. The cost of re-financing future debt maturities is another factor to consider when assessing capacity to invest.

Recent client activity

There have been several portfolio restructures and new funding transactions completed in November, with case studies soon to roll out on our website.

Additonaly, the banking market continues to be supportive of the sector, evidenced by recent deals that lowered margins across banking portfolios creating material value for our clients. Support is also evidenced by bank cooperation to amend loan covenants and reduce risk for Housing Associations. Where legacy long dated low margin facilities are in place, some banks seek to shorten tenor and increase the margin moderately, whilst others look at restructure and can offer 10 years or more.

To learn more about our work in the affordable housing sector, click here.

For more information, please contact Paul Stevens or John Tattersall.
 

Introduction

The UK higher education sector stands at a crossroads. Despite its global reputation, mounting financial challenges—frozen tuition fees, rising costs, and a decline in international students—are threatening its stability.

Centrus’ latest report, In Focus: The University Challenge, explores the financial pressures facing universities and offers strategic solutions to build resilience. From diversifying revenue streams to innovative funding models and decarbonisation strategies, the report highlights actionable pathways to a sustainable future.

Download the full report to explore how tailored hedging solutions can help navigate today’s volatile energy landscape. For further insights, please contact Russell Schofield-Bezer, Senior Advisor of Higher Education at Centrus.

Market update

• Since the last monthly update, the market has shifted to a more inflationary outlook and projection of higher interest rates for longer. The Government’s commitment to investment in the Autumn Statement is a key driver to the change in outlook. The US Election added to the markets
  conviction with President Trump’s policies considered inflationary across the world economy.
• The rise in Employers NI Contributions will add c. 3% to Housing Association staff costs, with most of the increase caused by the fall in the threshold to £5,000 from £9,100. The lower the average cost per employee, the greater the cost impact.
• October CPI of 2.3% was higher than the 2.2% expectation, with the jump from 1.7% in September due to the c. 10% increase in the energy price cap from 1 October 2024.
• Service inflation of 5.0% and wage growth of 4.8% reinforced the market outlook that inflation will remain persistently above 2% requiring the Bank of England to hold rates for longer.
• Prior to recent events and data releases, the inflationary outlook had dampened, and we saw a low in swap rates in September (3.4% for the 10 year). The swap curve rose for 6 weeks from that low in response to the revised inflationary outlook, and the 10-year swap is now steady at 4%. Gilt yields followed a similar path with the 30-year gilt yield up to 4.9%.

Implications for clients

• The higher inflation outlook will moderately improve rent increase projections with September 2025 CPI currently projected at 2.8%. However, the rise in Employer NIC and variable rate projections will more than offset this modest gain.
• As tempting as it is to speculate on future interest rate movements, we remind clients that interest rate risk management focuses on exposure to variable debt, headroom on covenants and policy limits. There is an equal chance the market projection will move up or down.
• With the spread between gilt yields and swaps back at a high (the 10-year gilt yield is c. 50bps higher than the swap), we anticipate a continued focus on new funding from the bank market and recommend clients remain aware of the capacity limit for their banking portfolio and review short term maturities.

Recent client activity

Centrus is busier than ever, actively advising clients on hedging and risk management across its core sectors of social housing, infrastructure, and other essential services. The demand for this expertise is being driven by heightened market volatility, the maturity of existing hedging arrangements, and a growing focus on achieving greater certainty around the cost of capital.

In addition to hedging, mergers and treasury strategy execution remain particularly active areas. Loan portfolio restructuring continues to play a pivotal role, delivering tangible value to clients and creating improved covenant headroom.

To learn more about our work in the affordable housing sector, click here.

For more information, please contact Paul Stevens or John Tattersall.