Economist W. Edwards Deming once famously said that "without data, you're just another person with an opinion", and although these pieces are essentially just that, opinion, sometimes market punditry can be incorrect, sometimes it's the result of misreading the data, and sometimes it's just utilising the wrong data, and this is what we may have seen lately with the media analysis of swaps rates. At the point of writing, the UK 10-year Swap is down sharply after the announcement from the ONS that the Consumer Prices Index (CPI) rose by 1.7% in the 12 months to September 2024, down from 2.2% in August, a reaction to the assumption that we will see a reduction in the bank of England base rate post the November MPC meeting.
This is in stark contrast to the media narrative of late that Swaps rates have been tracking upwards over 4% due to a plethora of fears over geopolitical tensions, our homegrown economic woes, and the domestic impact the upcoming budget may have on landlords. This is where, sometimes, if you need more data to make the most informed decision, the best thing you can do is watch the behaviour of those who may have the inside track. An example is listening to the market, Crude Oil; the price is dropping, down 1.33% since the start of the year; all of the contributing factors to that aside, Saudia over-production and economies weakening globally, it's not a data point you would likely see if geopolitical tensions were at a critical escalation point, it's potentially the opposite, which is contrary to the media popular narrative.
Employing that thinking to our sector with the price of UK debt, looking at the UK 10-Year Swap, contrary to the media narrative, it's been in a downtrend since June 2024, and if you deep dive into the historic SONIA rate data, you can see the six-month compounded rate has declined accordingly. The narrative in the media is often driven by businesses making commercial decisions rather than the data, as that's the most visible. In this instance, many top mortgage lenders, including Barclays and Santander, were reported to have pulled their top 5-year deals last week ahead of the inflation announcement, fuelling the negative sentiment in the press around a rolling back of expectation over price. Still, this type of defensive manoeuvring is just a practicality of bracing to profit from all outcomes. The exciting data shows the complete opposite picture: the value of new mortgage approvals is up 11.3% from the last quarter, and the overall debt in the mortgage market is increasing. It's expanding before the rate cuts, indicating that the market tells us the media story is wrong.
So, where are we going with this? We are now at a time when decisions are being made across the sector for 2025 regarding commitments; if you are reading this, you may be conversing with your property market clients to build or not to build. What we have gleaned through our perspective in the market is there is still that post-pandemic era uncertainty around price, but we are living in an era of great uncertainty; all we can do is be driven by the data and align our expectations with the correct data, not the popular story. Those businesses must build or cease to be, so now is a time to seek professional partners in the sectors, such as us.
Already, we're seeing some of the elements we previously hypothesised coming to fruition. This week, we noted that the Brownfield Land Release Fund will now play a significant role in allowing 54 councils to turn an industrial wasteland into 5200 homes. This is a promising development that underscores the potential for positive change in our sector, and the data point here we are interested in is the planned 550 Million of impact investing from both the private and public sectors, targeting the success of the broader housing targets. Again, this is the coming to be of many of the themes we have discussed over the last 24 months in these pieces: a deeper collaboration between public and private sectors, an enhancement of UK real estate as an investable commodity, and an indication of further liquidity coming into the industries that provide the debt, all positive data points and indicators of the scale of the opportunity ahead of us.
Invest & Fund has returned over £200 million of capital and interest to lenders with zero losses, showing the rigour that governs our business.
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