Inflation developments in the United Kingdom have produced an intricate and ambiguous situation heading into October 2025. And the Office for National Statistics (ONS) tells us that inflation is now running at 3.6%. This is a modest drop from September’s 3.8% rate. This is a steep drop from the high—11.1%—reached in October 2022. Most importantly, it illustrates the volatile boom-and-bust economic environment we’ve been subjected to over recent decades. The prevailing inflation rate has come down from its high-water marks. But it remains far above the Bank of England’s 2% target, which is stirring anxiety among consumers and officials.
In late 2020, inflation was basically at 0%. January 2020 saw inflation at 1.8%. By September 2024, the rate had fallen to 1.7%. This adjustment ushered in the recovery period leading up to the widespread price appreciation culminating in the late October 2022 high. The past few months have provided some relief, but consumers are still feeling the pinch from essential goods on a day-to-day basis.
Alice Haine, an economist, noted, “Inflation remains well above the Bank of England’s happy place of 2%.” This language acknowledges the real world, day-to-day struggle that consumers are going through with navigating higher costs of living.
Inflation is a key driver of the country’s overall cost of living, impacting every household expenditure from the price of food to rent and mortgage payments. As inflation continues to take a toll on American households, even basic staples like bread, meat, and potatoes have skyrocketed in price. Danni Hewson remarked, “Staples like bread, meat and potatoes all cost more than they did even a month ago,” underscoring the continuous struggle for households managing their budgets amid fluctuating prices.
Although these hurdles are daunting, there’s a bright spot for current and prospective homeowners eager to engage in the market. The average rate for a new two-year fixed mortgage is now 4.88%. At the same time, the average rate for a five-year fixed mortgage stands at 4.93%. David Hollingworth pointed out that “there has been particular emphasis placed on rates for home movers with some of the best rates available for purchases.” Whatever the cause, this trend is likely a product of lenders’ attempts to woo borrowers given the macroeconomic headwinds created by inflation.
Shadow Chancellor Rachel Reeves has expressed intentions to implement measures aimed at lowering the inflation rate. We’re glad to see her proposals focused on alleviating the financial burden on families feeling the squeeze of skyrocketing inflation. The effectiveness of these measures is still unknown. At the very least, they demonstrate government recognition of the continuous economic pressure the majority are experiencing.
We know inflation is affecting every corner of our daily lives. Consumer confidence is down, consumer behavior is changing, and their effect on consumer spending is growing more apparent. Additionally, increasing food costs and a volatile mortgage market further complicate things for people and families. They panic and don’t know how to balance the books in this new, difficult reality.