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1. Inflation Surprise: 3.8% in July
The latest ONS release shows inflation rose to 3.8% in July, up from 3.6% in June. This was driven by sharp airfare and food cost spikes, alongside lingering energy pressures.
Investor impact:
- Slower Rate Cuts Ahead: The Bank of England cut the base rate to 4.00% earlier this month, but this inflation uptick makes another cut this year unlikely. Investors should not expect borrowing costs to fall quickly.
- Financing Strategy: This is a moment to lock in competitive fixed-rate products while lenders remain aggressive on pricing, rather than waiting for cheaper debt that may not arrive until mid–2026.
- Risk Management: Investors with refinancing due in the next 12–18 months need to budget for refi at today’s elevated levels, not pre-2022 lows.
2. Rental Market: Growth Still Strong, But Cooling
Private rents grew 4.5% y/y in July, down from 5.8% in June, this is the slowest pace since late 2022.
Investor impact:
- Yields Are Resilient but Flattening: Rental income growth is still comfortably outpacing inflation in many areas, but the “supercharged” double-digit growth seen post-COVID is fading.
- Selectivity Matters: Yields will increasingly diverge by region. Student markets, commuter belts, and undersupplied city centres will maintain stronger momentum than saturated buy-to-let hotspots.
- Income Security over Rent Hikes: Instead of banking on aggressive rent increases, investors should focus on tenant retention, minimal voids, and value-added upgrades that justify sustainable premiums.
3. House Prices: Stability = Opportunity
Halifax and Nationwide both show +2.4% annual growth, with prices edging up month-on-month.
The official ONS HPI (to May) shows stronger +3.9% annual growth, with Northern Ireland and parts of the North leading.
Investor impact:
- Safe, Not Speculative Growth: The market is stabilising at a sustainable pace. For investors, this means less downside risk on acquisitions, but also no runaway capital appreciation in the short term.
- Regional Advantage: With London growth muted, regional cities and secondary markets offer better prospects for combining yield with capital upside.
- Timing the Entry: Acquiring now allows investors to benefit from steady price floors, then ride the upside when rates fall further in 2026–27.
4. Market Activity: Liquidity Returning
Mortgage approvals rose to 64,200 in June, the strongest since 2023.
Transactions reached 93,530 in June, +13% month-on-month.
Investor impact:
- Exit Liquidity Improving: A more active sales market makes it easier to sell assets when needed, critical for investors planning a medium-term hold.
- Still Room to Negotiate: Volumes are up, but not overheated. Distressed or time-sensitive sellers remain, especially heading into autumn.
- Strategic Positioning: Investors can now buy into a market with liquidity tailwinds but before widespread competition re-emerges in 2026.
What this means in practice for your portfolio decisions:
Finance defensively: Don’t hold out for cheaper debt. Secure competitive fixed rates now, or explore staggered maturities to balance flexibility with certainty.
Target resilient rental markets: Student housing, commuter towns, and well-located BTR (Build-to-Rent) schemes remain attractive, especially where demand outstrips supply.
Think regionally: Look beyond London. Northern regions and secondary cities are showing stronger rent growth and capital upside while still being relatively affordable.
Focus on income quality: With rent inflation cooling, investors who prioritise tenant stability and long-term occupancy will outperform those chasing headline yields.
Keep capital ready: If inflation remains sticky, more stock could come to market from landlords squeezed by refinancing. Being liquid in autumn could unlock discounted acquisitions.
