CPIH inflation slows despite record housing cost increase – ONS

In June 2023, the consumer price index including owner-occupier housing costs (CPIH) rose by 7.3%, the lowest rate since a 40-year peak in March 2022, according to figures from the Office for National Statistics (ONS).

The rate was down from 7.9% in May, and the recent peak of 9.6% in October 2022.

The CPI, not including owner-occupier housing costs, rose by 7.9%, down from 8.7% in May, and the recent peak of 11.1% in October 2022.

Owner-occupier housing costs accounted for 16% of the CPIH.

The core CPIH annual inflation rate was 6.4% in June 2023, down from 6.5% in May 2023, which was the highest rate since November 1991, when it was also 6.5%.

Owner-occupiers’ housing costs rose by 4.4% in the 12 months to June 2023, up from an annual rate of 4.2% in May and 3.2% the previous year.

This was the highest annual rate of increase in owner-occupier housing costs since November 1996.

The CPIH all goods index rose by 8.5% in the 12 months to June 2023, down from 9.7% in May.

The slowing in the rate was caused by a downward contribution from energy, where prices rose by 2.9% in the year to June 2023, down from 8.1% in the year to May.

The CPIH all services index rose by 6.3% in the 12 months to June 2023, unchanged from May. These rates are the highest since July 1992.

The largest upward contributions to the annual CPIH inflation rate in June 2023 came from housing and household services – principally electricity, gas and other fuels, and owner-occupiers’ housing costs – and food and non-alcoholic beverages.

The contribution from the former group was 2.27 percentage points, marginally down from 2.28 percentage points in May, and down from a recent high of 3.70 percentage points in January this year.


Andrew Gething, managing director of MorganAsh: 

“Following successive shocks, it’s positive to see inflation ease beyond expectations to its lowest level in more than a year.

“The hope is this news may allow mortgage lenders to reduce rates and budge even slightly on their fixed-rate pricing.

“This will be most welcome among those households set to remortgage in the near future.

“But beyond the lower headline inflation achieving the Bank of England’s forecast of 7.9%, we cannot escape the fact that it still remains well above its overall target of 2%.”

He added: “The aim of increasing bank rates is to curb spending. For mortgage holders, this will be most painful for around one million on variable rates and less of an issue for those still on fixed rates. 

“Meanwhile, the triple lock means pensioners are receiving increases in the 10% range. 

“You have to ask: is increasing pain on one million going to translate into bringing down spending on the rest of the country? 

“Sustained inflationary pressures are a result of an increase in the base costs of food and commodities due to the Ukraine war.

“This is not driven by increased consumer spending so trying to drive down consumer spending may not be an effective means to reduce inflation.”

Nicholas Mendes, mortgage technical manager at John Charcol:

“The latest figures exceeded the market forecasts of a reduction to 8.2%, and core inflation a key influencer on swap rates was also down to 6.9%.

“Core inflation remains close to a 30-year high, which is the area the Bank of England are targeting to bring down, so we can should still expect more rate rises in August and potentially September.

“The UK has the highest inflation amongst the G7 countries, but hopefully this marks the start of a downward trend and towards the Government target to halve inflation to 5% by the end of the year.

“While it’s difficult to pre-empt market reaction, this will hopefully have a positive impact on future market forecasts, and a calming to the recent volatility in fixed rates.

“It will take a few months before we see any substantial decreases in fixed rate pricing, the advice will be for mortgage holders unsure on their next move to speak to broker or their lender.”

Adam Oldfield, chief revenue officer at Phoebus Software:

“This is the most encouraging news that efforts to curb inflation are starting to have a positive effect. Especially after so many months of rising inflation.

“News today of a drop in inflation may lead people to think that the Bank of England is achieving its goal, which will mean an end to base rate rises.

“However, that may not be the case when underlying inflation remains high.

“Considering the fact that Consumer Duty is just around the corner lenders and brokers will need to be doing everything possible for those clients that may be starting to struggle.

“Even though inflation has come down we are still dealing with rising costs and the highest mortgage rates in decades. 

“One of the questions is, are the legacy systems many are using even able to identify the most exposed borrowers on their books? If not, how compliant can they be to the new rules?”

Nathan Emerson, CEO of Propertymark:

“As core inflation remains sticky, it is increasingly likely that the Bank of England will consider further interest rate rises.

“This has obvious impacts on mortgage holders, new and old.

“However, we are seeing a good amount of resilience in the market and serious buyers will continue to make a gain on the price achieved whilst sellers find a happy medium when negotiating the final agreed sale price.”

Peter Stamford, director of Alston-based Moor Mortgages: 

“For the sake of millions of homeowners, I sincerely hope that this will mean a pause in the Bank of England’s interest rate hikes. But I fear they will see this fall as proof their blunt-edged strategy has been working and continue to hike. This fall in inflation could have a sting in its tail regarding interest rates.”

John Choong, markets and equity analyst at InvestingReviews.co.uk: 

“Miracles do happen. For the first time in months, CPI comes in lower than expectations at 7.9%. Core CPI also comes in a touch lower at 6.9%, which should allow lenders and borrowers alike to breathe a sigh of relief.

“That said, champagne bottles shouldn’t be popped just yet as the path to 2% remains a treacherous journey, with core CPI still high and sticky. The easing figures should allow gilt yields to find some relief in the coming days, with markets now less likely to price in a 7% terminal rate from the Bank of England.

“We may now see mortgage rates start to come down as well. Nonetheless, this will be dependent on whether the next few prints continue to show cooling inflation, especially on the core front. With wage pressures also beginning to ease as well, there’s now hope that both the housing market and the UK economy can achieve a ‘soft landing’ without entering a recession.”

Jon Maloney, managing director of Wellingborough-based Century Business Finance

“Finally, some positive news regarding the economy, something that is much needed in the SME world right now.

“Hopefully, this will give the Bank of England the confidence to halt any further rate increases, which should in turn slowly begin to get things moving again in what has become a very stagnant period for the economy.

“There’s still a long way to go yet but things are moving in the right direction.”

Philip Dragoumis, owner of London-based wealth manager, Thera Wealth Management

“Finally some good news on inflation, or at least better than expectations. Expect the pound to come under pressure today and a rally in UK bonds. 6.9% core inflation is still high but at least it’s heading in the right direction.

“The Bank of England should pause but won’t. Another three months like this and mortgage rates will look very different.”

Craig Fish, Managing Director at London-based mortgage broker Lodestone:

“There is a god, after all. This fall in inflation and core inflation is bigger than expected and it’s expected to continue in this direction for the remainder of the year. It’s to be noted, though, that this has nothing to do with the Bank of England’s interest rate increases so I hope that they don’t try to take credit for it.

“Because the pain of the rate increases has not yet been felt by most mortgage holders, I sincerely hope that the MPC stop their ridiculous and futile approach to this problem, and ease off with the rate increases now. I fear they won’t and we may still see an increase or two, but mortgage holders across the UK are all crossing their fingers, toes, arms and legs.”

Wes Wilkes, CEO at the Newcastle-under-Lyme-based wealth manager, Net-Worth Ntwrk

“The move down in both headline and core CPI today, and also coming in under expectations, will be welcomed by markets and provide some relief to borrowers, investors and no doubt the Bank of England, too.

“Prices are still rising by nearly four times the Bank’s target so we are certainly not out of the woods by a long stretch but this could mean the start of the end of the vicious rate cycle as the Bank will want to avoid rising rates into a deflationary environment if the trend in inflation shifts aggressively downwards from here. Over to you Mr Bailey.”

Mark Grant of the UK-wide business finance broker, The Business Finance Branch

“Not only did headline UK inflation fall to 7.9%, lower than forecast, but crucially core inflation, stripping out volatile food and energy costs, also fell to 6.9% in June. Will this be enough for the Bank of England to hold interest rates at the August 3rd rate-setting meeting? The jury will be out for that.

“Ultimately, this data merely confirms prices are rising at a slower pace, but still rising at a high level year on year for businesses and consumers.

“This better than expected data is welcome but may not be good enough to prevent further interest rate rises and the increased cost of borrowing we have may already have set the economy on a course to recession in the near term.

“Many businesses I suspect will still not be feeling like the worst is over this morning.”

Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial: 

“The amount of this fall may just be the right amount to make the Bank of England change course. It’s more than expected, and should continue on this trajectory.

“With most mortgage holders not experiencing interest rate rises yet, because they are on fixed rates, it’s time for the Bank of England to reverse its strategy and start cutting rates.

“This is unlikely to happen until the end of the year but needs to be soon to stave off a severe recession.”