In the face of ongoing economic volatility, organisations can no longer rely on static forecasts. Continuous shifts in key macroeconomic parameters such as the CPI, interest rates and construction costs mean that financial forecasts must be revisited multiple times per year. Without regular updates, financial plans risk becoming disconnected from reality. To address these challenges, adopting a quarterly economic outlook provides housing associations with the necessary insights to stay aligned with the latest economic developments.

Main changes

  • The expectation for CPI in 2027 has increased to 3,4%. In 2028, the expected CPI has been lowered to 2,9%. On the long-term the expectation has remained the same.
  • Compared to the previous Quarterly Economic Outlook, expectations for the SONIA and long-term interest rate have remained the same.
  • The expectation for RPI has been lowered to 4,6% in 2027. In the following years, 2028-2030, RPI is expected to remain around 3,6%.

Each quarter, Ortec Finance publishes its Economic Outlook, drawing on the latest market developments and comprehensive research. This outlook is widely used by institutional investors around the world, including pension funds, insurers, and asset managers.

With the launch of our financial planning tool for UK housing associations earlier this year, we are delighted to share this outlook tailored specifically for this sector for the very first time. In this edition, we take a closer look at the key economic parameters most relevant to housing associations, providing insights to support informed decision-making in a rapidly changing environment.

Economic volatility in the UK Economy

The UK economy has faced several challenges in recent years, particularly following the sharp rise in interest rates during 2023-2024. These rate levels had not been seen since the financial crisis of 2008 and were a direct response to persistent inflation that remained well above the Bank of England’s target. While this tightening cycle cooled the housing market, leading to higher mortgage costs and slowing price growth, the Bank has since implemented several rate cuts, with the most recent reduction occurring in December of 2025. Despite these adjustments, the impact of the earlier spike continues to shape economic conditions. These trends highlight the need for continuous monitoring and adaptation of financial strategies to navigate the evolving economic landscape.

Recently, Ortec Finance’s Economic Outlook has seen some notable changes. When comparing the economic outlook of Q3 2026 to Q2 2026, some parameters differ. The expectation for CPI has increased for 2027, but afterwards, the expected CPI has been shifted downwards. Long-term expectations have remained the same. The economic outlook for Q3 2026 forecasts 3.4% | 2.9% | 2.5% for 2027-2029 while the outlook for Q2 2026 showed 2.9% | 3.3% | 2.8% for the same period. The current CPI forecast of 3.4% refers to the September CPI figure, which is typically used as the basis for annual rent increases in the UK social housing sector. This implies a forecasted rent increase of 3.4% from April 2027.

Economic Outlook CPI

As of July, the inflation was reported to be 2.6%1. However, the Bank of England has indicated that achieving its 2% inflation target is unlikely soon. Energy price rises are expected to push inflation higher in the coming months and the Monetary Policy Committee is closely monitoring the risk that inflation could lead to more persistent inflationary pressures.


1 Consumer price inflation, UK - Office for National Statistics


Expectations for the long-term interest rate and SONIA

Expectations for the long-term interest rate and SONIA have not changed significantly compared to last quarter. The bank rate remained at 3.75% over the past five policy meetings. However, experts now anticipate several rate increases before the end of this year due to a concern about increased CPI. Earlier this year, analysts were forecasting at least one rate cut. The coming months should offer more clarity on the future direction of monetary policy. If inflation remains persistent, the Bank of England may maintain its restrictive policy stance, which would support a higher SONIA path. However, if inflation eases over the medium-term policy rates could be lowered.

The current expectation for the SONIA is 3.8% | 4.0% | 3.9% for 2027-2029. This is slightly lower in the coming years than previous period, with an expectation of 4.0% | 4.1% | 3.8%.

The outlook for long-term interest rates remained the same compared to the previous quarter, with an expectation of 4.4% | 4.5% | 4.5% for 2027-2029.

Continued long-term rates above around 4.5% mean that borrowing costs are likely to remain a key pressure point in long-term financial plans. Housing association may therefore need to continue stress-testing their multi-year budgets.

Economic SONIA + Margin

Scenario Generation with the Economic Scenario Generator

The scenarios underpinning our quarterly economic outlook are produced using the Economic Scenario Generator (ESG). This model draws on historical data and constructs scenarios based on three core components:

  • Historical trends: Long-term developments observed in key economic indicators.
  • Cyclical movements: Medium-term fluctuations driven by the business cycle.
  • Short-term fluctuations: Temporary deviations resulting from recent shocks or market events.

The ESG also accounts for correlations between parameters that have been consistently demonstrated in historical data, so-called “stylized facts”. In exceptional cases, the model may be manually adjusted to incorporate expert views, particularly when there is broad consensus that certain developments will significantly impact economic expectations. This ensures that the scenarios generated are both accurate and reflective of current economic realities.

UK vs Dutch Market Practices

One difference between Dutch and UK housing associations is how cost inflation is treated in long-term financial plans. In the UK, many associations assume CPI is the main macro-economic driver for both rent increases and cost inflation. In the Netherlands, cost inflation is typically modelled using more specific drivers, most notably wage growth and construction material costs. This is a reasonable assumption, given that wage growth and construction material costs have consistently outpaced CPI over the past five years.

Realized CPI, wage inflations and construction costs (March 2019 = 100)

Using differentiated indices leads to more accurate plans and a closer match to real cost pressures. It allows housing associations to reflect rising labour and material costs, as well as regulatory changes that affect expenditure over time. For that reason, our quarterly economic outlook goes beyond CPI and interest rates. It also includes forecasts for inflation of salaries, construction costs, maintenance costs, and sales values.

Questions on economic outlook for Housing Associations

If you have any questions or comments about this article, or if you would like further information regarding opportunities for UK housing associations, please get in touch with Thomas or David using the contact details below. They will be pleased to assist you.

More about Real Estate Financial Planning

Previous publications

Interested how UK housing associations have been performing over time? Then read our previous publications.

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