In October 2023, UK inflation fell to 3.6%. This is a small drop from 3.8% in August, according to the Office for National Statistics (ONS). This decline is a big turnaround from the recent high point of 11.1% reached in October 2022. The rate of inflation we’re all living through is a reflection of the broader economic phenomenon that has unfolded in the last few years. Inflation was at 1.8% in January 2020, but plummeted close to 0% by the end of 2020.
The other big CPI story right now – the CPI annual inflation rate. A dotted line chart forecasts this information from January 2020 to 10/2025. This timeline shows just how high and low inflation has been through the years, and how it remains incredibly volatile. The recent inflation drop provides little more than a reprieve to borrowers. With high inflation still making life increasingly difficult, particularly as food prices are soaring, economic insecurity remains a top issue for most Americans.
The effect that inflation has had on increasing mortgage rates is hard to overstate. As interest rates fall with lower inflation lenders will typically re-evaluate their loan offers. At the moment, that means an average rate of 4.88% for a new UK two-year fixed mortgage deal. At the same time, five-year fixed rates have gone up modestly, now at 4.93%. David Hollingworth noted that “there has been particular emphasis placed on rates for home movers with some of the best rates available for purchases.” That means the recent drop of inflation might help usher in a broader trend of easing borrowing conditions for home shoppers.
Despite a potential positive turn with mortgage rates, increasing food costs are still hitting consumers where it hurts. The Bank of England highlighted that “concerns about rising food costs and utility bills still dominate conversations.” For many people up and down the UK, the price of the weekly food shop is still one of their biggest concerns. Danni Hewson pointed out that “staples like bread, meat and potatoes all cost more than they did even a month ago.” This quote really highlights the day to day fight families are having right now as they try to account for what the increase of inflation means.
Labour’s Shadow Chancellor Rachel Reeves recently announced plans for a “new inflation act” to bring down the UK’s soaring inflation rate. Fleur should be looking to address our cost of living crisis. She repeated the message that addressing inflation is key to delivering relief to families facing higher costs.
While the recent inflation decrease is a welcome sign of possible economic stabilization, it is important to understand its constraints. Alice Haine remarked, “Inflation remains well above the Bank of England’s happy place of 2%,” indicating that while progress is being made, substantial work remains to achieve desired stability.