Market Update - September 2026

0:03Hey everyone, Rob B here with Rob Dix. This week on the Property Podcast, it's bonds. Government bonds. Unfortunately not James, but more important, far more important, what is going on in the world right now impacts us all. We break it down and help you understand how you can best navigate the world right now with the bond market going a little crazy.

0:30yes thank you for joining us if you feel a little bit guilty guilty you don't understand what's going on in the world of macro at the moment do not fear we're here to put that right and the puns get a little bit less painful from here on in as well we arrange more than 100 million pounds worth of property deals for our clients every year and all of them all the time want to know what is going on in the world what's going to happen what's going to happen with mortgage rates what's happening to rents well we cover all of that and more in this episode rob i think we need to talk about the economy because a lot of people when it comes to investment property or otherwise really get focused on the details the micro but it's the macro that's going to move everything this week and i think understanding what's happening in the world at least at a high level will help you then understand why things are changing for you on a day-to-day level so let's get into it what are we talking about well the big story i think we need to talk about that's going to affect us all even though most people don't realize this is the bond market the bond bond market in the UK and worldwide is really volatile right now.

1:30What is happening? Kick up a pod with a bond market. You know how to hook them in, don't you? The sexy stuff. You're right. Exactly. But it is important. And what we're seeing in not just the UK, but the UK, the US, much of the world, is that bond yields are increasing. In other words, people who are lending money to governments, they want a higher interest rate. And that means it's costing governments more to borrow money. But Rob, why? That's the big question. I think most people can understand the headline. Okay, it's going up. And if it was just the UK, you could go, oh, well, you know, the UK is not really fancied anymore.

2:04But it's not exclusive to the UK. This seems a worldwide issue. Bonds are going up, major bonds, countries' bonds are going up across the globe. It's not just a UK-specific challenge. No, it is most of the world. And there are lots of reasons. Multifactorial, you could say, if you want to sound fancy. There are loads of reasons. and I don't want to sound fancy. I want to say there are loads of reasons. The problem for governments is there is no easy fix. There's lots of things happening at the same time, all contributing to this, all for very different reasons. So it's not like, oh, you just change this and you're sorted.

2:34So if we cover off a few of the big ones, the obvious one is inflation, right? So when you buy a bond, you get a fixed amount of income. So if you believe there's going to be more inflation in the future and that income is going to be worth less, then you're going to demand a higher interest rate to compensate at you for that fear of inflation. And the longer inflation keeps on being higher for, the more worried people get about this and you get into a kind of loop. But another piece of this as well, which is supply and demand. So on the supply side, governments are running big deficits. In other words, governments are having to issue lots and lots of bonds every year just to cover the spending that they've committed to.

3:08So the US deficit is massive. The UK deficit is massive they have no choice but to keep adding supply into the market every year and that amount of supply has just been going up but on the other side of that the demand side is falling away a little bit again there's loads and loads of reasons for this including pension funds and what's happening in japan all sorts but the interesting one is there's now more competition because the big tech companies are issuing lots of bonds to fund the build out of data centers because of ai and so on so your typical pension fund or sovereign wealth fund or whoever it is would be buying government bonds has now got a choice.

3:43They could buy corporate bonds instead. And sometimes those come with a higher interest rate. They look pretty much as safe. So what you've got is the supply is high and getting higher. Demand is dropping away. So obviously, we'd expect to happen in that situation, Rob, is interest rates go up because the buyers are sitting there going, well, you need us to buy them. You don't have a choice. You have to, but we want a higher interest rate and you've got to pay us. Thank you, Rob. That was a beautiful summary of what is going on right now with bond markets and I learned as well so very much appreciate it and this of course then impacts us all and we can explain why that happens so first of all that uncertainty that mild volatility has spiked swap rates remember swap rates we talk about a lot on the podcast swap rates are where lenders get their money what they borrow at so a lender will borrow at a swap rate and then lend to you they don't borrow at interest rates the bank of england interest rates it's a common misconception.

4:40People think, okay, well, what's the interest rate? Therefore, that should be what my borrowing rate is. The lenders will put a margin on that, and then I will pay that rate, that slight premium. But it's not, it's swap rates, and that's where they get their money from. And with this volatility, this bit of uncertainty, there's been a temporary spike. And actually, swap rates now are the highest they've been since October 2023 at just over 4.5%. Okay, so what does that mean for you as the person on the ground, the aspiring property investor or the established property investor? Well, that means that you would expect lenders to put up their rates.

5:18And that is what started, only just started to happen. Coventry Building Society have moved first, and that's across their residential products and their buy-to-let products. So they've gone, others are following, but not all have gone yet. So if you're in the middle of a purchase, locking in a rate now would be a very good thing don't be slow on your paperwork get a good rate locked in because once it's locked in you're fine because they will normally honor it but if you take your time then the whole market may move beyond you now it doesn't mean your investments are dead you can't invest of course not that's nonsense this is a temporary measure so you wouldn't not invest if you've got a great deal but if you can get a slightly better rate by moving quickly then you should be moving quickly but for whatever reason if you miss out you can refinance in two or five years depending on which way you go but it is starting to move and that's why we started with the big picture what's happening across the world but then bring it back to well how does it impact you and i and this is the you and i bit it's the mortgages the mortgages that we all love to use because leverage is so important will be a little bit more expensive for the time being yeah there are times when it can make sense to hold back because you think well maybe i'll go a little bit lower from here but this doesn't feel like one of those times but it's also not a time to get obsessed with exactly what rate you're paying or despair because you could have got 0.2 of a percent lower last month.

6:37Obviously, if you're fixing for five years, you want that rate to be as low as it can be. But really, when we're looking at investments, when we're talking to our clients about it, you're looking at what's going to happen if you hold this asset for 10, 20 or more years. And in that context, when you come back and you look at the big picture, teeny little variations in the mortgage rate that you're paying for the first couple of years really doesn't move the needle at all. And when we're thinking about long-term borrowing, so what rates could you be paying over the entire time that you hold the investment?

7:03Well, that ties back into the bond market again. So we'll come back to that in a future episode, because I think it's a really interesting implication that leads on from what we were talking about earlier, which is about, well, what do governments do about this? Because they have to sell the bonds, they have to issue the debt, but they also can't just see the interest rate go up and up and up. And there are various tricks that they have up their sleeve, which I think we will start seeing coming out from their sleeve and being used, that went weird, in the coming years, because they've got to do something.

7:29Now, Rob, touch briefly on inflation, just to note that it's held stubbornly. at 2.9%. So what does that mean for the next Bank of England meeting? Because that is happening next week on September 17th. Well, the expectation is rates will be held. Now, while lenders don't borrow against the Bank of England rate, confusingly, that rate does influence the swap markets as well. So what we end up borrowing is heavily influenced by their decisions. There was talk in the past that it may go up, but it looks like at the moment, just about a week to go, is that the consensus is that rates will be held and i think i'd take that i think rates being held would be a good thing so the 17th of september is one day to have in your diary but there's another big date coming up rob yes the budget the budget is less than two months away and that's great because we haven't talked about it much yet and last year we were forced to talk about it seemingly three four months ahead of time and it pretty much brought investment and business and everything to a standstill waiting to see what terrible thing was going to happen in the budget and of course it didn't in the end i think you make a really good point rob i think that can't be underestimated it wasn't just once it's twice that happened two budgets in a row and it was like what is going on when are they going to learn so either collectively labor have learned or andy burnham's taking it in a new direction but it is really pleasing that this is the first time we're talking about it yeah we might have to give some credit to politicians they well maybe they have learned from this because it hasn't been quite the same rumor mill i think they've moved fairly quickly to quash lots of suggestions about what might happen so exit tax is something that came up and they quickly said nope that's not going to happen this time and also reforms to stamp duty which we know Andy Burnham is keen on doing in principle but they've said that's not going to happen this time around so I think generally that is helpful the problem of course is that there's not really a lot that they can do because they've already with their fiscal rules and their working people definition and all the rest of it ruled out doing the things that would actually make a big difference and then lots of the fiddling around the edges trying to raise a little bit more from this group of people that group of people they've also ruled out so what are they going to do the budget rob i throw it over to you as a question because i have absolutely no idea i actually feel and yes this is being recorded i actually feel sorry for the government this time around because of the bond market because just as the first budget comes around for a new prime minister you say his hands are tied because of their own fiscal constraints they put on themselves but it's been exacerbated by the fact that the bond market has increased in terms of the borrowing levels and why is that important because that as we've explained is how governments get money they borrow and the cost of borrowing now for the government has gone up so whatever plans Andy Burnham may have had maybe now he's having to backtrack because of their own fiscal constraints and how they can operate from what he'd originally intended we'll see what I'm hoping for and I've been hoping since the Labour government have come in because it didn't really happen under the Tories things have cut back pretty much been the same story so far with Labour there's been no real difference and what am I looking for from this budget Robbie from greedy investment and meaningful investment not a few hundred billion here or there because across the nation that's nothing something major major infrastructure major changes things that will uplift the country the economy that's what I'm hoping for I mean maybe a bit ambitious especially with where we are globally at the moment but private sector partnerships to get things built i think andy burnham has got a great track record in manchester and the argument would be made that running the city of manchester and running the country are two very different jobs and that is absolutely correct but at least his mindset is a growth mindset it seems anyway this could all sound very silly in a month's time when we see the budget but i'm maybe very stupidly semi-hopeful for the first time in a long time that we might see some ambition in a budget we will see yeah i don't know if i share that ambition but from a property investor's point of view at least i'm certainly less on tender hooks than i have been in many past years there's nothing obviously coming down the tracks that you could think oh this could cause us a problem here or they're going to hit us with this this time i think the obvious one is probably capital gains tax that's the one where you could see them putting it up but then will they because capital gains tax is one where you've actually got some discretion about when you realise that gain.

11:45And so you could easily see receipts actually falling as people decide not to bank a capital gain and just kind of sit tight and hope that a future government brings the rate down again. So who knows? But thankfully, we don't have all that long to wait until we find out. A quick note on house prices. There's not a lot to say here. Nationwide, house prices are up by 0.2 % for the month, which puts the annual growth rate at 1.6. And Lloyd's, which used to be Halifax, still not over that, is up by 0.1%. and that puts it annually at 0.1%. So it's looking like an absolute nothing year for property prices in 2026 and actually with everything that's gone on in the world in 2026, I mean we say this every year now but it has been another mad one.

12:28You know what, having a flat year, if you told me at the start of the year everything was going to transpire this year, one I probably wouldn't have believed you and two if I had to believe you and you then told me property prices would be flat this year, I would have taken that. It's not going to help our predictions, Rob, at the end of the year, but a nothing year in a world that's a bit crazy right now seems fair enough. I think it probably does. And the silent correction that we talk about continues because both inflation and wage growth continue to run higher than property price growth. So affordability of property is improving.

12:57And that makes it really interesting, Rob, because we talk about property, how it in certain areas is an undervalued asset right now. We looked at the Warren Buffett method of investing recently on the podcast and those numbers plus the numbers we're about to report exacerbate that even further because rents are continuing to go up while property prices in real terms are falling so the value play just keeps on increasing yep yields just get further and better because rents are up 3.7 percent year on year according to the ONS that is higher than inflation it's had a bit of a spike recently and that's been put down to the unintended unintended consequences of the renters rights act so what that's done to supply what that's done to landlords being minded to put their rents up while they can and what's happened around how rents are set in the first place and this is a topic i think we should come back to rob in a future episode there's lots of really interesting stuff going on here and we've seen some things on the ground about this as well but the upshot of it as you said is rents going up and yields improving and we talk about that opportunity and i can understand why people go well of course guys you're going to talk of the market and say it's a great opportunity, which is not true.

14:02We don't always say that. And in the past, we've talked about how different markets are difficult. But actually, if you take a long-term approach, then now it doesn't matter too much. However, however, this new story is interesting from Handel's Banking. If you're not familiar with Handel's Banking, it's a bank that really just operates with high net worth. So people with money, professional investors, if you like, and they surveyed their clients. And what was really interesting from that investor money, that's smart money if you like experience money is that 71 % and I'm surprised by how high this is 71 % are planning on buy to let investment in the next 12 months and that has been broken down further into what they're going to invest in which I think is really interesting as well so 63 % plan to increase their exposure to houses over the next 12 months and 59 % are increasing their exposure to flats and then 48 % to HMOs.

14:58I think some people would guess that houses would be the highest, then flats, then HMOs, but it's really interesting that the smart money is equal. And that's what we talk about. That's what our portfolios are balanced like as well, Rob, is that it's a good mix between houses and apartments. And it seems the high net worth clients of Handels Bank are also going in that direction as well. I think the big number though, to repeat it is 71 % of their clients that they surveyed are going in to buy to let in the next 12 months which shows that that smart money can see that opportunity the fact that prices have been falling in real terms for a long time in property yet rents keep going up that value play is there and it's starting to get noticed it is striking and it's yet more evidence of this trend that we've been talking about for a while now but i think there's a lot further to run or where you are going to get a smaller number of bigger landlords.

15:48Now, that's not saying huge companies are going to come in and own everything, but Handel's Bank and Scale, you're probably talking about people who are going to be building up portfolios of, I don't know, like 5 to 50 would probably be their kind of size. I think you're going to end up with a lot more people building portfolios at that kind of scale and a lot of the ones and twos dropping away. And again, there are lots of reasons for that. One of those reasons is regulation. It's getting harder. It's stay compliant as a landlord and the penalties for not doing that are getting more severe. There's a story this month about the PRS database which is coming so that's yet another cost and another thing that you have to do and another fine if you don't do it in exactly the right way.

16:25There's also a story this month about short-term lets and how there's now going to be a mandatory register of those apparently coming in from March next year. So that's one of the forces making somebody who does own one property on the side go I can't be bothered with this anymore. we can finish with this rob because i think it's really interesting because at the moment we don't really know exactly how many landlords there are in the country or how many properties they own you can kind of work it out from tax data but there is no database in wales they do have such a database and i was stunned by this it shows that five percent of landlords own a third of all rented properties in wales and the top 0.6 and to be in the top 0.6 of landlords in wales you need to have 21 properties they own 15 of the market and i don't know what i would have guessed but i wouldn't not put it anywhere near that amount so the market in wales at least is already far more concentrated towards big landlords than i thought it would be it'll be very interesting when we do get the data for england for this but i do think as we track that data over time it is going to get more and more concentrated because down at the other end in wales 70 percent own just a single property and i think that's the proportion that we're going to see dropping away i think the way property works these days you're incentivized to go for it and build a portfolio rather than just buy one and then just leave it there.

17:41Can you retire from one property if you just get one buy to let? I suppose if you start early enough in life, absolutely yes. But to build something big and meaningful, if you're going to go for it, you may as well go all in. And if you've only got the deposit for one, you can build more. That's something we teach our clients on how they can build a portfolio just from one deposit. But the reason for that is just stopping at one, for most people now, doesn't make sense particularly the way things are set up and where the trends are going it's all about building a meaningful portfolio not one that's going to take over your life but a meaningful portfolio that will then make a material difference to you and and others you care about but that's a story for another day because now it's time for hub extra and rob you told me before we went on there and i promise everyone this is all he said is my hub extra is coffee spray so what i'm hoping rob this isn't your new cologne recommendation maybe it should be i do love to love coffee i do this is something that my wife found i don't know where she came across it but she said to me is that you should get this and i spent about half a second looking at their website yes yes i should because it's ultra concentrated coffee in a can and this is like the ultimate instagram product because it's so cool when you see it in action because basically you just put your water in a glass get your little canister it's like a compressed air canister spray it and your water becomes coffee it just looks so cool you can use it for hot coffee or iced coffee i use it for iced coffee because it's so much easier than any other method and the taste is not the absolute best coffee i've ever had but it's perfectly good enough and it's bloody cool so i'll put a link in the show notes you can see it for yourself and you can amaze and astound all your friends next time you're with them by whipping out your little coffee can you know what rob i wanted to mock but the iced coffee bit that's the bit that you got me with because this is a bit of a fast making iced coffee so all right maybe there's another purchase on the way for this company and if i get you as the secret santa this year i know uh what to get it's got a nice easy win and you know what else is an easy win oh look at the segue there rob you can tell i'm a podcast another easy win is to join us next week for the podcast see or sign up for property pulse which is the best newsletter in property bar none i'm biased but it's also true make sure you're getting that in your inbox each and every friday go to propertyhub.net forward slash pulse read our stuff in the Sunday Times where you'll see us smiling back at you and dropping knowledge bombs.

20:00And if you just haven't got enough to do, tell your friends about all our lovely content as well so they can enjoy and learn and benefit. Until all those wonderful things take place, take care, have fun. Bye-bye. Bye-bye.