With the Wilcox incident behind them, Margaret and Helen Schlegel move on with their lives. They attend a concert at Queens Hall with Tibby, Aunt Juley, their German cousin Frieda Mosebach, and their cousin's suitor, Herr Liesecke. Throughout the performance, Margaret chats with a young man, Tibby follows the music with a score, and Helen envisions goblins battling over Beethoven's Fifth Symphony. Helen is so moved by both the music and her imagination that she suddenly gets up and leaves, which, according to her siblings, is nothing out of the ordinary. As she departs, she absentmindedly takes with her an umbrella that in fact does not belong to her.
The young man that Margaret has been chatting with is Leonard Bast. He soon discovers that Helen as taken his umbrella. Because it is too late to go after her, Margaret requests his address so that she may later return his umbrella to him. Slightly suspicious and awkward by nature, Leonard declines. After the concert, Margaret invites him to Wickham Place to fetch his umbrella. She finds him interesting and intends to serve him tea. As they walk, she discusses the arts, causing Leonard to envy her life of culture and privilege. He is uneasy throughout their conversation, for he feels that he is unable to contribute. He longs to be part of such an intellectual world.
When they arrive at the Schlegel residence, Margaret informs Helen of her mistake. Embarrassed and apologetic, Helen begins to search the house for the umbrella in question. Upon finding one, she announces that it is so tattered that it could not possible belong to Leonard, but indeed it does. The uncomfortable situation immediately erases any hope of his staying for tea, and after mumbling some words of gratitude, Leonard quickly departs.
The Schlegel sisters realize that they have offended Leonard and are embarrassed by the incident. They have a conversation with Aunt Juley about trust and suspicion, where Margaret recalls her father's statement about the importance of taking the risk of trusting people. Tibby then calls them to tea, during which Helen finds fault with him for not having been more of a host to Leonard Bast since he is the only male in the house. The discussion moves to Margaret's conclusion that their home is female in nature, yet not because there are more women than men in it. Rather, she suggests that the house has a personality beyond the people that live in it. In contrast, she mentions that the Wilcox house is masculine in nature.
As the Schlegels enjoy tea, Leonard Bast walks home, thinking bitterly about the umbrella incident. His financial status is much lower than that of the Schlegel family, and he had to refrain from buying a newspaper in order to be able to afford the concert where he met them. When he arrives at his home, a basement apartment in an area made up of hastily built flats called Camelia Road, he sits down to read Ruskin. Leonard is hoping to improve his skills in English prose through his reading. While he is far from financially comfortable, he is also not entirely poor, and thinks he can maintain social respectability by becoming cultured.
Upon hearing somebody enter the house, he closes the book, putting the calling card that he received from Margaret into it as a bookmark. Jacky has arrived. Not as attractive as she was in her youth, she is in her thirties and suffers from some hearing loss. Leonard, not yet twenty-one, has promised to marry her as soon as he comes of age. She does not fit into his ideals of attaining high culture, but he claims that he would never be capable of abandoning a woman in trouble. After a meager dinner, Leonard is relieved when Jacky goes to bed so that he can focus on his Ruskin. He regards her as a distraction in his attempts to improve his education, for she incessantly questions his love for her, especially after she sees Margaret's calling card fall out of his book.
The next day, Aunt Juley, who has been all but spying on the flats across the way, informs Margaret that the Wilcoxes have moved into one of them. Helen makes an untimely entrance and discovers the news, leading her to blush severely as she remembers the embarrassing incident with Paul. Margaret and Aunt Juley fear for her wellbeing under the awkward circumstances and Aunt Juley is especially worried, as she is departing in the morning and will be leaving her nieces unattended. Margaret maintains that everything will be fine and that no planning ahead is necessary. She does, however, confront Helen about how intensely she blushed upon hearing the news. Helen says that there is nothing to worry about, for she has been invited to go to Germany with Frieda for a little while, and moreover, there is no chance of her ever again esteeming a Wilcox.
With the introduction of Leonard Bast, another layer of social class is brought into the novel. The differences between the Schlegels and the Wilcoxes that earlier seemed so pronounced now pale in comparison, for both of them are relatively well off compared to Leonard. The relationship between the rich and the poor is an important theme in Howards End, and Leonard Bast serves as the primary representative of the latter group, despite his not being at the very bottom of the financial ladder. After the umbrella incident, the Schlegels feel sympathy for Leonard, which is exactly what he did not want. He detests the idea of being regarded as a charity case, for he does not want to be defined by his class. This is why he tries so hard to further himself intellectually, putting his desire for culture ahead of virtually everything else in his life.
Leonard's envy of the Schlegels does not result solely from their stable financial situation. In truth, he is more jealous of their knowledge of the arts and their ability to talk about culture so freely than their wealth. However, he does concede that they live better lives because they need not worry about falling into the abyss of poverty. Leonard thinks of himself as teetering on the edge, which puts him in a difficult situation of not feeling comfortable in either world. He feels awkward when in conversation with Margaret due to her intelligence and cleverness. Conversations with Jacky, meanwhile, are equally uncomfortable, due both to her hearing problem and her inability to understand literature and culture. Leonard is trapped between two worlds. There is no way for him to end up completely on the more fortunate side, for circumstances such as Jacky and his lack of money are holding him back, but he is determined to do the best that he can.
Leonard's situation is an example of the economic barriers in London. He does not want to give the Schlegels his address because he fears that if they know of his financial status, their opinion of him will change and he will have no chance of being esteemed in their eyes. There is some truth to his fear, as after he runs out with his umbrella, the Schlegels immediately begin to worry over and even pity him. Even they, with their notions of the inner life and personal relationships, can fall victim to making assumptions based on one's outer existence.
The issue of class also appears in regard to the Wilcoxes. Aunt Juley accuses the family of social climbing by moving into the city, indicating that there are divisions even within classes. However, all agree on the importance of having money. Margaret likens money to an island that people such as herself and the Wilcoxes can rely on for protection. She discusses how the well off can take certain things for granted, and one must recall Leonard Bast's situation. Margaret speaks of money frankly and without shame, for she is not afraid to state the way things are, even though many people would be taken aback by her discussing finances so openly.
The Wilcoxes are returning to the picture, and the Schlegel sisters' reactions to this news reveal aspects of their characters. Despite their outward similarities, Margaret and Helen are actually quite different. Though sometimes impulsive, Margaret is able to handle situations with a steady hand, whereas Helen tends to run away when she feels uncomfortable. For example, she hastily leaves the concert due to her overwhelming vision of goblins, and feelings of panic and emptiness. Similarly, she runs away from potential awkwardness with the Wilcoxes by traveling with Frieda. This behavior suggests that her romance with Paul had a larger impact on her than she is willing to let on. Inevitably, the two families will continue to interact, and drama will ensue. Forster continues to prime them for connection, for nothing in Howards End is accidental.