Households face fresh financial strain as soaring food, fuel and flight costs drive inflation higher than expected, dashing hopes of cheaper mortgages this year.
Official figures show the Consumer Prices Index jumped to 3.8% in July, up from 3.6% and nearly double the Bank of England’s 2% target. Service inflation hit 5%, while the Bank now expects the rate to peak at 4% in September.
The ONS reported a 30% surge in airfares, the steepest July increase in over two decades, fuelled by school holiday demand. Petrol and diesel prices also rose, while staples such as coffee, orange juice, meat and chocolate saw sharp increases.
Mortgage Relief on Ice
The rise has slammed the brakes on expectations of a November base rate cut. Analysts now warn it may not happen until 2026.
“This latest jump in inflation will slam the door on any meaningful reduction in mortgage interest rates,” said Peter Stimson, director at MPowered Mortgages.
Consumers Under Pressure
Propertymark chief executive Nathan Emerson said the increase raised “very justified concerns” for families still battling the cost-of-living crisis, despite earlier rate cuts providing some relief.
John Phillips, CEO of Just Mortgages, added: “Inflation remains ultra sticky, unpredictable and highly vulnerable to shocks. Another rise takes us one step closer to 4%—double the Bank’s target.”
The Bottom Line
With prices rising faster than expected and the Bank of England forced to hold fire on rate cuts, the squeeze on households is set to continue well into next year.