Inflation Back on the Rise, Three MPC Hawks, and Why the Commercial Window Stays Open

Three MPC Members Voted to Raise Rates. The Conversation Has Changed.

For the last eighteen months, the debate in the financial press has been about when rates would be cut. How many cuts in 2025? How fast would they fall? The assumption was that 3.75% was a ceiling, not a floor.

The July 30 MPC meeting changed that framing. The Bank of England voted 6-3 to hold the base rate at 3.75% — but the three dissenters were not pushing for a cut. Megan Greene, Catherine Mann and Huw Pill each voted to raise rates to 4%. That is a meaningful shift. Three of nine members of the Monetary Policy Committee now believe the current rate is too low.

The next MPC decision falls on 17 September 2026. A Reuters poll of economists suggests most expect another hold. But the direction of risk has changed. The question is no longer just "when do rates fall?" It is also "do they go higher first?" That matters enormously for how you think about the next twelve months in property.

CPI Hit 2.9% in July. The Dip Was a Blip.

UK CPI inflation fell to 2.6% in June, and for a brief moment it looked like the path back to the 2% target was clear. July's figures shut that down. Inflation jumped back to 2.9% — the second monthly rise in a row after the peak of 3.3% seen in March.

The August inflation figures are due on 16 September, the day before the MPC meets. If they show another tick upward, a rate raise on September 17 becomes a live possibility. If they come in flat or lower, the MPC will almost certainly hold again. Either way, the August number is the most important piece of UK economic data between now and the MPC decision.

What is driving the persistence? Services inflation is the main culprit. Wage growth has remained elevated, and services businesses have continued to pass costs on. The energy price cap reset in April added upward pressure that is still working through. The Bank's 2% target is not in sight in the near term. The MPC hawks are looking at this data and concluding that more needs to be done. That is why the vote went 6-3 for a hold rather than the 8-1 or 7-2 patterns we saw twelve months ago.

Approvals at a Two-and-a-Half-Year Low. The Buyer Pool Is Shrinking.

Bank of England data published on 1 September shows just 56,100 mortgage approvals in July 2026. That is down 3.6% from June, down 15% on a year ago, and the lowest monthly figure since January 2024.

The six-month average sits at 60,800. The trend is clearly downward. Elevated mortgage costs — BTL rates running at 4% to 5.75% depending on loan-to-value and product type — are pricing buyers out at the margin. Gross mortgage lending fell from £26.9bn in June to £25.9bn in July.

Remortgaging is the only bright spot: approvals there rose from 34,100 to 34,500 in July. That tells you the same story from a different angle. Existing owners are managing debt on properties they already hold. They are not buying more. The buy-to-let sector in particular is contracting. An estimated 93,000 landlords left the private rental sector in 2025 alone. In 2026, a further 16% of remaining landlords say they plan to sell their entire portfolio within two years, and a third are looking to reduce their holdings.

The Renters Rights Act and the abolition of Section 21 removed the safety valve landlords relied on. Higher borrowing costs removed the margin. Tax changes removed the tax efficiency. The three things that made BTL work through the 2010s have all been dialled back at once.

Completions Lowest Since 2015. The Government Is 74% Short of Its Own Target.

Housing completions in England for the financial year 2025-26 came in at 143,110. That is down from 152,040 the year before, and the lowest annual total since 2015-16. The government's target is 1.5 million homes over the parliament that started in July 2024. By June 2026 — roughly the halfway point — just 392,400 net additions have been made. That is 26% of the target.

To hit 1.5 million by the end of the parliament, delivery needs to accelerate sharply. Starts are up 15% year-on-year in 2025-26, which is the first genuinely positive data point in a while. But starts turning into completions takes 18 to 24 months. The pipeline does not yet support a step change in delivery at the pace needed.

Construction cost inflation, planning delays in the traditional consent route, and ongoing insolvencies in the building sector are all working against the government's ambition. The National House Building Council and MHCLG acknowledge the gap. The preferred solution, from a policy perspective, is to use the permitted development route wherever possible — it is faster, cheaper for the state, and avoids the planning queue entirely.

Commercial Yields at 7%. Investment Volumes Depressed. Sellers Are Active.

MSCI data shows all-property commercial equivalent yields sitting at approximately 7.0% in mid-2026. That number has been broadly stable for two years, which tells you something: institutional sellers are accepting the new pricing reality and transacting. This is not a frozen market. It is an adjusting one.

Investment volumes remain well below five-year quarterly averages. Offices are 25% below average. Retail is 47% below. Industrial is 54% below. The buyers who drove those averages — pension funds and institutional investors with cheap leverage — are not back yet. Which means the buyers who are active right now are operating with less competition.

For a developer looking at Class MA permitted development, this is the environment you want. You can buy Class E commercial stock at prices set by income-based investors pricing off 7% yields, then convert to residential use where the value driver is square footage rather than income. The gap between commercial value and residential value per square foot is still wide. It widens further in locations where residential demand is strong and office vacancy is high.

One thing to keep in mind: the conditions that make this opportunity available are specifically the conditions being complained about everywhere else. Rates are elevated. Inflation is sticky. Borrowing is expensive. Those are exactly the forces that suppress commercial property prices and keep institutional capital on the sidelines. When those conditions reverse, the opportunity narrows. Nobody rings a bell when the window starts closing.