The Consumer Prices Index (CPI) rose by 2.3% in the 12 months to October 2024, up from 1.7% in September, the latest data from the Office for National Statistics (ONS) has revealed.
On a monthly basis, CPI rose by 0.6% in October, up from being little changed in October 2023.
The Consumer Prices Index including owner-occupiers’ housing costs (CPIH) rose by 3.2% throughout the month, up from 2.6% in September.
Month-to-month, CPIH rose by 0.6%, up from 0.1% in October 2023.
The largest upward contribution to the monthly change in both CPIH and CPI annual rates came from housing and household services, mainly because of electricity and gas prices.
This news comes following the Bank of England’s recent decision to reduce the base rate from 5.0% to 4.75% in an effort to bolster economic activity amidst slowing growth and ongoing cost-of-living pressures.
Reaction:
Rachael Hunnisett, director at April Mortgages:
“Inflation soaring back above the Bank of England’s 2% target is a fresh blow for borrowers, effectively ruling out any chance of a base rate cut in December.
“The bank has previously indicated that lower inflation would help to drive further rate cuts, but this spike changes the economic outlook.
“Mortgage rates have been creeping up since the Budget and may be further impacted as a result of today’s announcement, which is higher than most market expectations.
“These recent rate changes are a sign of how quickly the mortgage market can reverse course.”
Nathan Emerson, CEO at Propertymark:
“It is disappointing to see that inflation has increased considering the overall trend throughout the year.
“However, there are many national and global factors that impact the UK economy, hopefully inflation will better stabilise, and the UK economy should continue to adapt, no matter what happens in response to national and international events.
“With housing playing a vital role in the growth of the economy, over time it would be positive to see interest rates drop to levels not seen since 2019, in order that more people can afford to enter the housing market for the first time, or make their next all-important home move.”
Richard Pike, chief sales and marketing officer at Phoebus Software:
“Although there remains a lot of unknowns in economic terms of fallout from the Budget and further base rate cuts, today’s inflation rise to 2.3% is not unexpected following a large drop in September.
“Moving forward, consumer pricing is expected to rise as businesses pass on the cost of increased national insurance commitments.
“But this in turn could result in businesses such as retailers cutting jobs in an already tough market.
“In terms of rate decreases, I expect we’ll be back to the Bank of England’s ‘let’s-wait-and-see’ tactic with the message remaining one of cautious optimism – despite economic output remaining stable over the three months to September.
“The Chancellor’s rhetoric and policies over the parliamentary term doesn’t exactly provide confidence that anything will change in the next five years.
“I can’t see a Monetary Policy Committee interest rate vote for a rate cut coming in December unless they are really giving us all a big surprise Christmas present.
“However, into 2025, I still expect a lowering of rates.
“That said, we need to make consumers and borrowers understand that rates at 3.5% to 4% will be the norm for their financial futures, so they may as well take products that are available today which in turn would stimulate all areas of the market which is good for all.”
Neil Rudge, chief banking officer, commercial at Shawbrook:
“Price growth exceeding the Bank of England’s 2% target for the first time in two months may unsettle business owners, as significant cost pressures persist.
“The increase in Employers’ National Insurance continues to be a major challenge, further exacerbating the strain on businesses as rising costs remain difficult to manage.
“Additionally, the slower-than-expected reduction in the base rate, coupled with the difficulty in passing on rising costs to customers, means many business owners will need to reflect on the challenges ahead. In such an environment, resilience will be crucial.
“Those who can adapt and navigate these pressures will be best positioned to prosper.
“Looking ahead, the possibility of further rate cuts could reduce borrowing costs and provide businesses with some much-needed breathing room as they head into 2025.
“With the Autumn Budget now behind us, leaders should feel in a stronger position to advance their growth plans, with one less layer of uncertainty to navigate.”
Peter Stimson, head of product at MPowered Mortgages:
“Anyone who declared ‘mission accomplished’ in Britain’s battle against inflation last month spoke too soon.
“After spending one solitary month below the Bank of England’s 2% target, consumer inflation has leapt back into warning territory.
“At 2.3%, annual CPI is barely a fifth of the painful 11.1% it reached in October 2022.
“But this abrupt move in the wrong direction is a setback for the Bank’s ratesetters, who are duty-bound to get inflation down to 2% and keep it there.
“The Bank had already predicted inflation would rise above the 2% threshold, but the Government’s ‘tax and spend’ Budget is likely to stoke inflation further in 2025.
“With CPI already rising, inflation is once again a worry for anyone planning to buy their first home or remortgage in the coming months.
“The return of inflationary pressure means the Bank of England is likely to adopt a ‘wait and see’ approach on any further Base Rate reductions, not just in December, but in the immediate months following as well.
“While this was to a large extent expected, it doesn’t offer any relief to mortgage
lenders and is unlikely to allow them to reduce the interest rates they offer to new
customers in the run up to Christmas.
“Looking ahead to 2025, the pace of Base Rate cuts is now likely to be ‘slower and
lower’ than it was just a few than few weeks ago, and this is being reflected in a rising swaps market which has already forced many lenders to increase their mortgage interest rates over the past few weeks.”
Isaac Stell, investment manager at Wealth Club, said:
“Headline inflation reaccelerated in October to the highest rate since April 2024.
“The reacceleration can largely be attributed to increases in energy prices following the 10% rise in the energy price cap which came into force in October.
“This rise will likely see an additional £149 added to the average annual household bill according to Ofgem.
“The surprising strength of the latest inflation figures gives the Bank of England a conundrum.
“With economic growth in the UK stalling, rate cuts would seem like the appropriate medicine, however, cutting rates into inflationary strength wouldn’t usually be what the economic doctors order.
“With inflation close to target and one off’s causing the latest spike up, the Bank of England should feel confident about reducing rates by 0.25% in December, helping to ease the burden on consumers facing a rise in their heating bills as the winter weather begins to set in.”
Warren Martin, director of operations at ONP Solicitors:
“The stark monthly increases, driven partially by rising energy costs, underline how volatile key expenditure areas remain.
“The challenge now is balancing economic recovery with affordability concerns, especially as housing costs remain a significant contributor.
“Looking ahead, if energy prices don’t rise further inflation could hopefully stabilise over the coming months.
“However, with the Bank of England likely to stay cautious, a base rate cut still feels out of reach until early 2025. In the meantime, households and businesses will need to carefully navigate this period of uncertainty.”
David Hollingworth, associate director at L&C Mortgages:
“It was widely anticipated that the rate of inflation would rise back above the Bank of England’s target and the Bank itself has been clear that a rise was on the cards.
“That will come as little comfort for households with an eye on their energy bill but it could also bring further headaches for mortgage borrowers.
“Although the rate lifting above target is not a shock, at 2.3% it is a little higher than many had expected.
“That will pour more cold water on the prospects for another cut to base rate to come next month, which will be disappointing news for those on a variable or tracker rate mortgage.
“Fixed rates have already been on the move and have climbed in recent weeks, often by 0.25% of a percentage point or more.
“That has driven fixed mortgage rates upwards, and all the UK high street lender rates are now back above 4%, with only Allied Irish Bank clinging onto anything below that.
“Those increases are due to the less optimistic forecast for interest rates and today’s figures will do nothing to change that.
“Although still expected to fall, the growing expectation has been for rates to fall more slowly and not as far as previously anticipated.
“Being at the upper end of expectation, today’s inflation figure will only harden that view, which could knock on to lender’s cost of funding.
“Borrowers will therefore need to remain on their toes, as mortgage deals are still in something of a state of flux and lenders are repricing regularly.
“There certainly isn’t the luxury of being able to hold off from committing to a deal and expecting it to still be there in a week or so, as rates continue to come and go quickly.
“It would be of little surprise if that trend continues and fixed rates are pushed higher on the back of today’s news.”
