30/10/2025
Market update
- UK inflation remained steady at 3.8% in September, below the expected 4%. This is positive news for both the BOE and the Chancellor, and hopefully marks the beginning of a forecasted decline in inflation moving forward, rather than mirroring last year’s drop followed by a much unwelcome continued rise thereafter.
- Optimism surrounding inflation has led to speculation about a potential Bank of England rate cut in December, although the base rate remains unchanged at 4%.
- Nonetheless, speculation has fed through into the rates environment, with the swap curve seeing a material c.20bps reduction vs September across all tenors and Gilt yields falling by as much as 28bps – both a very welcome sight.
Implications for clients
- October’s fall in rates, whilst a welcome outcome, has confirmed how sensitive rates are to both positive and negative news, and this is only expected to continue as we quickly approach the budget at the end of November.
- Volatility is likely to increase as we approach the budget, with policy leaks expected to rise and drive market reactions.
- HAs should build this into their timing considerations for funding or hedging, with conditions likely to be most challenging around the Budget window and immediately afterwards.
- Clients should continue to look out for announcements on housing policy, particularly rent convergence and grant regime, alongside announcements on the expected low-cost development funding that could open up development opportunities.
To learn more about our work in the affordable housing sector, click here.
For more information, please contact Paul Stevens or John Tattersall.
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