The UK economy continues to face uncertainty as rising energy prices put pressure on inflation, government borrowing increases and the Bank of England considers its next move on interest rates. At the same time, consumer confidence is beginning to improve, offering some encouragement for households thinking about their finances and future plans.
For anyone considering buying or selling a property in Huntingdonshire, these developments provide useful context for understanding the wider housing market.
Interest rates remain unchanged as inflation risks grow
The Bank of England kept the base rate at 3.75% in September, although policymakers warned that a prolonged period of higher energy prices could lead to further increases.
The decision was not unanimous. Six members of the Monetary Policy Committee voted to leave rates unchanged, while three supported an immediate increase to 4%. Those favouring a rise were concerned that higher energy costs could feed into wages and prices across the wider economy, making inflation more difficult to control.
Inflation rose to 3.1% in August, above the Bank’s 2% target. The Bank now expects inflation to rise further if energy prices remain elevated, with the potential to exceed 4% in early 2027.
For homeowners and prospective buyers, interest rates are an important part of the financial picture. They influence mortgage pricing, monthly repayments and how much buyers may be able to borrow. Although the base rate does not determine every mortgage rate directly, uncertainty about future decisions can affect lenders’ pricing and borrowers’ confidence.
Anyone considering a move may therefore want to think carefully about affordability, particularly if they are taking out a mortgage or approaching the end of a fixed-rate deal.
Global economic growth remains resilient, but challenges remain
Despite ongoing geopolitical tensions and renewed inflationary pressures, the Organisation for Economic Co-operation and Development (OECD) has slightly upgraded its forecast for global economic growth in 2026.
The organisation expects the global economy to grow by 2.9% this year, compared with its previous forecast of 2.8%. However, its outlook for 2027 has been reduced slightly to 3%.
For the UK, GDP growth is forecast at 1.1% in 2026 and 1% in 2027. While this suggests the economy is continuing to expand, growth is expected to remain relatively modest.
Higher energy and food prices could place further pressure on household budgets, leaving people with less disposable income for savings, home improvements or a property move. Higher borrowing costs may also influence spending decisions.
Nevertheless, economic forecasts do not tell the whole story of the local property market. Housing demand can vary considerably between towns and neighbourhoods, depending on property types, affordability, employment opportunities and the number of homes available.
Government borrowing puts pressure on the Budget
The latest borrowing figures have added another challenge for the government ahead of the October Budget.
Public sector borrowing reached £18.3 billion in August, exceeding expectations. Higher debt-interest payments have contributed to the pressure, while rising government bond yields have increased the cost of borrowing.
This leaves the government with difficult decisions around public spending, taxation and its wider economic plans.
For households, the Budget may bring changes that affect the cost of living and the amount of money available after essential expenses. These factors can influence decisions about whether to buy, sell, move or remain in an existing property.
However, until specific measures are announced and their effects become clearer, it is difficult to predict exactly how any changes will affect individual households or the housing market.
Consumer confidence reaches its highest level in two years
There is some more encouraging news for the economy. The GfK Consumer Confidence Barometer rose to -13 in September, marking its third consecutive monthly increase and its highest reading since August 2024.
Consumers reported improved perceptions of their personal finances and the wider economic outlook. Expectations for personal finances over the next year also remained positive.
This suggests that, although people may be feeling more optimistic, many are still prioritising financial security.
In the property market, confidence can play an important role. Buying or selling a home is a significant financial commitment, so people may be more inclined to proceed when they feel secure about their income, borrowing costs and future expenses.
At the same time, improved confidence does not automatically translate into increased property transactions. Individual circumstances, mortgage affordability and the availability of suitable homes all remain important considerations.
Looking ahead
The next Bank of England interest rate announcement, scheduled for 5 November, will provide another indication of how policymakers view the balance between inflation and economic growth. The October Budget may also offer further clarity on the government’s approach to the economy and household finances.
For now, uncertainty remains, particularly around energy prices and their effect on inflation. However, the improvement in consumer confidence offers a more positive sign after a challenging period for many households.
For anyone considering a property move, keeping informed about these developments can help provide context, but there is no single answer that applies to every buyer or seller. Personal finances, individual priorities and local market conditions remain central to making an informed decision.
Information sourced from: Quilter October 2026 Economic Review
