Mortgage holders and private renters have experienced the highest annual inflation rates, according to the Office for National Statistics (ONS), due to rising interest rates pushing up monthly payments.
Households with mortgages had the highest annual inflation rate of 3.7% in the year to June, the ONS’s latest Household Costs Index showed, whilst private renters saw overall price rises of 3.2%. Those who own their properties outright, however, faced inflation of just 1.3%. Renters face steep costs because many landlords have increased rents in recent months to cover steeper mortgage payments.
Inflation is essentially the rate at which prices of goods and services increase. The ONS’s main measure of inflation, the Consumers Prices Index (CPI), looks at the prices of lots of different items we spend money on, such as food and utility bills, and track how these costs change over time. Unlike CPI, however, the Household Costs Index includes changes in mortgage interest rates, Stamp Duty and other costs related to the purchase of a property. It also provides insight into the inflationary experience of different household groups.
For example, non-retired households continued to experience a higher annual rate of inflation (2.9% in the year to June 2024) than retired households (1.2%) mainly because retired households have often paid off their mortgages.
Overall, household costs were up 2.5% in the 12 months to June, significantly lower than the 4.5% seen in the year to March and 9.8% a year earlier, with this reduction mainly due to easing energy bills, although these are set to rise in October when the new higher Energy Price Cap comes into effect. Lower costs are also down to slower growth in the cost of food and non-alcoholic beverages, and miscellaneous goods and services.
If you’ve seen a sharp jump in the cost of your monthly mortgage payments, it’s vital to check you’re on the best possible mortgage deal, especially as rates have edged downwards in recent weeks following August’s base rate reduction. Seek advice from a mortgage broker if you need help working out the most cost-effective deal for you.
