29-05-2025
What's YOUR inflation rate? How renting, having children and being a high earner can drive it up
Renters are facing higher inflation than those who have a mortgage, according to new data from the Office for National Statistics.
It revealed that households in private rented properties had the highest annual inflation rate of 3.6 per cent in March, reflecting rising private rental costs.
A big contributor has been the fact that UK monthly private rents increased by 7.7 per cent in the 12 months to March, according to the ONS, but this fell to 7.4 per cent in April.
Private renters were followed by renters in social housing, who had a 3 per cent inflation rate.
In contrast, mortgage-free homeowners experienced the lowest annual inflation rate of all housing types, at 1.8 per cent in the year to March.
Households with mortgages had the next-lowest at 2.8 per cent.
Riz Malik, director at wealth management firm R3 Wealth, said: 'Once tenant costs increase they rarely decrease, particularly with many landlords raising rents due to the 2022 mortgage rate hikes following the infamous mini-Budget.
'This gap continues to grow, and while some may manage to get onto the property ladder, many will remain part of generation rent.
'This situation is especially challenging for those in the south east or working in major cities.'
Richer households see higher inflation
Overall household costs, as measured by the Household Costs Index, rose by 2.6 per cent in the year to March.
This is a fall from 2.9 per cent in the year to December 2024.
However, inflation is slightly higher for those who earn more. It rises to 2.7 per cent for high-income households and falls to 2.5 per cent for low-income households.
Inflation has dropped substantially for higher earners, though, coming in at 4.7 per cent a year earlier.
Another interesting disparity picked up in the data was that non-retired households are experiencing a higher annual rate of inflation at 2.8 per cent in March than retired households at just 2.1 per cent.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: 'The inflation rate slowed for retirees, and is now just 2.1 per cent - down from 3.1 per cent a year earlier.
'The change is thanks to lower bills, which tend to make up a larger proportion of the spending of this group so the cuts to the energy price cap have a disproportionately positive impact.
'Unfortunately, it means pensioners will have borne much of the brunt of Awful April, so early 2025 will only have been a brief respite from rising prices.'
Retired people also aren't paying fast-rising costs associated with commuting, such as train season tickets.
It is also costing more for those raising children. The annual inflation rate for households with children was 2.8 per cent in March.
However, for households without children, it was 2.6 per cent.
These inflation rates are likely to have risen since the data was gathered in March.
Overall CPI inflation rose to 3.5 per cent in April, up from 2.6 per cent in March, driven by a huge hike in household bills.
In addition, energy, water and council tax bills were hiked for many last month in what has been dubbed 'Awful April'.
Coles added: 'Inflation eased in early 2025, but it still put a real squeeze on lower earners and renters.
'Unfortunately, life is only going to get tougher, as shortly after these figures were calculated, Awful April hit hard. Those same groups are likely to face the biggest challenges in the months to come.'
Why is inflation different for everyone?
The consumer prices index measures the average change in prices of roughly 730 core goods and services over time.
This includes everything from transport to food and services.
Every month, a team of roughly 300 analysts visit 20,000 shops in 141 different locations recording around 180,000 prices in the process.
The truth is, there's no such thing as a single rate of inflation. Everyone will have their own because people buy different goods and services from an array of shops and sellers.
It means certain individuals will have noticed the rising cost of living far more than others over the past 12 months.
The changing price of dog food, for example, is not going to be relevant to someone who does not have a canine companion.
Instead, Britain's national statisticians aim to create a representative basket of goods broadly reflective of the nation's shopping habits.
This basket, which is used to calculate what we know as 'the rate of inflation', or the consumer prices index, is updated once a year to reflect changing tastes.
For example, at the start of 2024, 16 items were added to the consumer prices index and 15 items were removed.
Additions to the basket for 2024 included air fryers, vinyl records, gluten-free rice cakes and spray oil.
Removals from the basket included hand sanitiser, sofa beds, rotisserie cooked hot whole chicken and bakeware.
Best mortgage rates and how to find them
Mortgage rates have risen substantially over recent years, meaning that those remortgaging or buying a home face higher costs.
That makes it even more important to search out the best possible rate for you and get good mortgage advice, whether you are a first-time buyer, home owner or buy-to-let landlord.
> Mortgage rates calculator
> Find the right mortgage for you
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This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit.
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