As fast as the OBR can press the send button on their report, this week we have decided to fire out an end-of-week briefing of our own, in the first of what will become a two-part exploration of the deeper narratives of this week's extraordinary budget. We asked ourselves: What are the takeaways for our clients, and how can we identify trends across the 200 pages of utterly exhaustive assessment? Always ahead of schedule, we read the blue book so that you can take a quick look. Read on below!
The Office for Budget Responsibility’s Economic and Fiscal Outlook (EFO), November 2025, paints a picture of a UK economy still adjusting to higher interest rates, evolving tax policy, and ongoing challenges in the housing sector. Yet within the 200-page report are several fundamental trends that point to a strengthening environment for alternative lenders and for the housebuilding SMEs that rely on this kind of flexible, development-focused finance. The OBR expects residential investment growth to rise from 1% in 2025 to around 7% in 2027 and 2028 as monetary policy loosens and planning reforms take effect. For our sector, this is a significant tailwind. SME developers, our core borrowers, typically require finance during such expansion cycles. Growth of this magnitude indicates increased demand for capital to initiate new schemes, complete stalled ones, and expand site pipelines. The reason this narrative is so well hidden is that, on the surface, the cost challenges and meeting wage growth challenges from a small-business perspective will not be easy, but this report is about projections and the road ahead, and there is reason here to be optimistic.
Net additions to the housing stock are expected to rise from 215,000 in 2026-27 to 305,000 in 2029-30, a substantial uplift, explicitly attributed to the incoming planning reform impacts. This is unequivocally positive for SME housebuilders. As planning becomes less of a bottleneck, more small and medium sites become viable. Platforms like ours thrive in precisely this space, where smaller developers who cannot access major bank lending step in to deliver new homes.
Despite economic challenges, the OBR forecasts UK average house prices to rise from £260,000 in 2024 to just under £305,000 by 2030, at roughly 2.5–3% annual growth. Now I know what you are thinking, affordability, liquidity, surely this contradicts so much of what you have said in the past to flip bullish on housing inflation? Well, steady, modest growth (not a wild boom) is healthy for development lenders: it improves exit certainty for developers, mitigates the risk of end-value shortfalls, and supports confidence in refinancing and sales strategies. For our investors on the I&F platform, this reduces volatility in underlying development-loan risk profiles. The second significant statistic is that the OBR expects property transactions to grow from 1.1 million in 2024 to around 1.3 million in 2029. This will mean higher liquidity in the market, smoother sales for developer exit strategies, and more refinancing opportunities for borrowers. A more active market supports faster loan turnover, key to keeping portfolios healthy.
The big one for lending, interest rates, is expected to fall from 2026 onward, with the Bank Rate declining to 3.6% by the end of 2026 before gradually rising again but staying below recent highs. This has a widespread positive impact, not just on costs but also on factors like site acquisition and on risk assessment for cost overruns in multi-year builds. What is unique to development lending is that what stimulates the client/borrower side is not more challenging times, meaning people need to borrow more, akin to consumer lending; it's actually the feasibility. Feasibility is king; it drives borrower demand, peaks lender interest, and sparks more exploratory conversations that drive more business and more growth.
One issue of feasibility that will be of paramount concern to our clients today is that cumulative labour-income growth is revised upward in the forecast, with nominal earnings growing faster than previously expected. As much as that issue poses challenges in the construction sector, from a nationwide standpoint, higher income growth relative to house-price growth supports affordability, increases buyer activity in lower- to mid-market segments, boosts absorption rates for SME-built units, and embeds resilience in developer exit values. This is especially relevant for our sector, as we support projects at affordable-to-mid-market price points.
Taken together, the OBR’s November 2025 outlook and the budget present a mixed macroeconomic landscape but one that leans positive for housing development over the next five years. The medium-term trajectory suggests a market environment of increased activity, improved exits, and stronger underlying demand, all of which reduce risk and enhance the attractiveness of property-backed lending.
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