Ortec Finance has published its Q3 2026 Quarterly Economic Outlook for UK housing associations, warning that static forecasting is no longer sufficient as CPI, interest rates and construction costs continue to shift throughout the year.
The report’s headline change is a rise in the 2027 CPI expectation to 3.4%, up from the 2.9% forecast in Q2 2026. The 2028 figure has been revised down to 2.9%, while long-term expectations remain unchanged.
Because September’s CPI figure is typically used to set annual rent increases across the UK social housing sector, Ortec Finance’s updated forecast implies a 3.4% rent rise from April 2027. RPI expectations have also been trimmed, with 2027 now forecast at 4.6% before settling around 3.6% between 2028 and 2030.
Inflation stood at 2.6% in July, according to the Office for National Statistics, and Ortec Finance notes that the Bank of England has signalled its 2% target is unlikely to be met soon, with rising energy prices expected to add further upward pressure.
On interest rates, Ortec Finance found little movement compared with the previous quarter. The bank rate has held at 3.75% across five consecutive policy meetings. Notably, analysts who were forecasting rate cuts earlier in the year now anticipate possible increases before year-end amid renewed inflation concerns. SONIA is forecast at 3.8%, 4.0% and 3.9% for 2027-2029, slightly softer than the prior quarter’s 4.0%, 4.1% and 3.8%. Long-term interest rate expectations are unchanged at 4.4%, 4.5% and 4.5% for the same period, a level Ortec Finance says will keep borrowing costs a persistent pressure point in multi-year budgets.
The forecasts are generated through Ortec Finance’s Economic Scenario Generator, which combines historical trends, cyclical movements and short-term fluctuations, with manual adjustments applied only where there is broad expert consensus.
Ortec Finance also highlighted a structural difference between UK and Dutch housing markets: UK associations largely treat CPI as the primary driver of both rent and cost inflation, whereas Dutch counterparts model cost inflation separately using wage growth and construction material costs, both of which have outpaced CPI over the past five years. Ortec Finance argues this differentiated approach produces more accurate financial plans by reflecting labour, material and regulatory cost pressures more precisely.
For more, read the full report here.
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