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Daily Mail
29-05-2025
- Business
- Daily Mail
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 To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C. 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. You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes. If you're ready to find your next mortgage, why not use This is Money and L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you.
Telegraph
08-05-2025
- Business
- Telegraph
Boost for homeowners as mortgage rates on track to hit 3.5pc
Homebuyers could see mortgage rates as low as 3.5pc by the end of the year as lenders respond to Bank of England interest rate cuts, brokers have said. Economists predict the Bank will slash the base rate by 0.25 percentage points to 4.25pc, and will gradually reduce rates to 3.5pc by the end of the year. It means homeowners remortgaging this year could see average rates 'somewhere in the region of 4pc', with some brokers predicting rates could fall even further. Lenders typically price in forecasts for the base rate, so Thursday's decision is not expected to affect mortgages in the near future. However, this is the first Bank of England meeting since Donald Trump's 'Liberation Day' tariffs caused a steep drop in interest rate swaps – the main pricing mechanism for fixed-rate mortgages. Brokers are hopeful some lenders will offer rates below 3.5pc. Mike Staton, of Staton Mortgages, said: 'I am confident that we will see fixed rate options lower than that figure.' But Mr Statton warned low rates were typically accompanied by high fees, such as Halifax's low rate currently, which has an attached fee of £1,495. Wealth manager, Riz Malik, of R3 Wealth, said: 'Fixed-rate mortgages under 3.5pc are certainly achievable by the end of the year, especially for those borrowing under 65pc of the value of their property, if rate cuts meet market expectations.' It comes as Britain's biggest building society cut its mortgage rates for the second time in two weeks ahead of the Bank Rate decision. Nationwide on Thursday announced rate cuts of up to 0.3 percentage points, while Halifax reduced rates by up to 0.18 percentage points. TSB and Virgin Money also lowered deals ahead of the vote. Robert Gardener, chief economist at Nationwide, warned that low rates were typically paired with large fees or would require large deposits. He added: 'Markets are expecting policymakers to lower the Bank Rate further and faster than a few months ago. However, you've got a lot going on in the global economy that could change.' The average rate for a two-year fix is currently 5.14pc, according to analyst Moneyfacts. Five-year fixes average at 5.08pc. Andrew Goodwin, of Oxford Economics, said: 'We are expecting mortgage rates to come down to somewhere in the region of 4pc by the end of next month. 'These are quite a lot cheaper than they were six months ago, but still a lot dearer than they were before the rate-hiking cycle of 2022.' Mortgage rates surged from 3.1pc to 5.1pc between January and October 2022 as Liz Truss' infamous 'mini-Budget' sent markets into chaos. Those coming to the end of mortgages fixed before that period still face a 'large increase in debt servicing costs', Mr Goodwin warned. Rachel Springall, of said: 'Two-year fixed rates were at their lowest point since September 2022, which was a few weeks prior to the notorious fiscal announcement, or 'mini-Budget', that saw markets panic and mortgage rates skyrocket.' There is potential for rates to fall even further, with HSBC predicting the base rate could fall to 3pc by August next year. However, Simon Pittaway, of the Resolution Foundation, said: 'Are we going to get to the old world of mortgage rates starting with a number one? Not in anyone's central forecasts. 'We're in a completely different world. Unless something massive happens, no one expects mortgage rates to go back to what they were then.'
