Inflation in the UK has increased, reaching 2.3% in October 2024, according to the ONS. This marks a rise from 1.7% in September.
- The CPI including owner occupiers’ housing costs (CPIH) also surged, reflecting significant changes in economic conditions.
- The rise was primarily driven by escalating costs in housing and household services, especially electricity and gas.
- The Bank of England’s earlier base rate cut aimed to stimulate growth, yet inflation continues to pose challenges.
- Experts remain divided on the future economic outlook, with rate cuts unlikely in the immediate months ahead.
The Office for National Statistics (ONS) has reported a noteworthy rise in the Consumer Prices Index (CPI), reaching 2.3% over the 12 months leading to October 2024. This increase, up from 1.7% in September, highlights the ongoing adjustments within the UK’s economic landscape. Notably, the CPI including owner-occupiers’ housing costs (CPIH) also rose to 3.2% during October, driven largely by heightened electricity and gas prices.
This inflationary uptick comes after the Bank of England had lowered the base rate from 5.0% to 4.75%, aimed at supporting economic activity amidst a slowing growth environment. However, as inflation climbs above the bank’s 2% target, experts predict it will impact mortgage rates, which have been creeping upwards since the Budget was announced.
Rachael Hunnisett of April Mortgages noted that this unexpected inflation surge would likely nullify any chances of a base rate cut in the upcoming months, which were previously anticipated as a response to lower inflation. Economic perspectives like these underscore the market’s unpredictability.
Despite the inflationary pressure, Nathan Emerson from Propertymark remains hopeful for future interest rate reductions, which would potentially make housing more affordable. Yet, the complexities of national and global influences mean that stability in inflation remains uncertain.
Richard Pike of Phoebus Software suggested that consumer prices might soon rise as businesses pass on the costs of increased national insurance obligations. Such economic stresses may lead to a challenging business environment where job cuts could be considered, countering the stable economic output observed recently.
In the coming months, the ‘wait-and-see’ approach by the Bank of England may prevail as they contend with these economic pressures. The government’s recent budget has also been implicated in potentially igniting future inflationary trends.
Neil Rudge from Shawbrook emphasised the unease amongst business owners, who are grappling with persistent cost pressures. The compounded effect of national insurance increases exacerbates this strain, highlighting the need for adaptability and resilience.
From a mortgage market perspective, David Hollingworth from L&C Mortgages remarked on the anticipated rise in inflation and its implications for mortgage borrowers. The lift in CPI above 2% reflects less optimism for interest rate cuts, and fixed mortgage rates have been climbing in recent weeks. These trends suggest that borrowers need to remain vigilant as the market continues to respond swiftly to these economic developments.
The inflation rise underscores ongoing economic challenges, stressing vigilance and adaptability across sectors.
