UK inflation fell for the first time since March, with the Consumer Prices Index (CPI) rising by 3.6% in the 12 months to October, down from 3.8% in September.
The broader CPIH measure, which includes owner occupiers’ housing costs, eased to 3.8% from 4.1%.
On a monthly basis, both CPI and CPIH rose by 0.4% compared with a 0.6% increase a year earlier.
The Office for National Statistics said housing and household services made the largest downward contribution to the change in the annual rate, while food and non-alcoholic beverages provided the biggest offsetting upward contribution.
Within CPIH, the goods annual rate fell from 2.9% to 2.6% and services slowed from 4.9% to 4.6%.
Core CPIH eased to 3.7% from 3.9%, its lowest since November 2021, and core CPI edged down to 3.4% from 3.5%.
The shift in housing-related inflation reflected slower increases in gas and electricity following Ofgem’s October price cap adjustment, alongside a ninth consecutive monthly easing in owner occupiers’ housing costs to 4.8% year-on-year.
Market participants said the moderation supports the case for further monetary easing, though attention now turns to next week’s Budget.
Simon Webb, managing director of capital markets and finance at LiveMore, said: “Given the shadow the Budget is casting over the sector, inflation beginning to take a downward trajectory, as forecast by the Bank of England, provides a glimmer of hope.
“But whether we get another base rate cut before the end of the year now entirely rests on how the sector and the MPC reacts to Reeve’s economic roadmap next week.
“For the later life lending market, now is the time for borrowers to lock in a deal, before the Budget throws a few spanners in the works.
“Many over-50s are making financial decisions that span decades, and while short-term movements are inevitable, the long-term need for flexible, accessible borrowing options remains clear.
“This period offers a chance to strengthen conversations around building financial resilience in later life, ensuring older borrowers continue to benefit as the market evolves in a positive direction.”
Nick Hale, CEO of Movera, said: “Inflation dropping to 3.6% is a positive indicator that regardless of what comes from next week’s budget, we could see another base rate cut from the Bank of England this year.
“Whether Reeves will be able generate growth while tackling rising living costs and paving the way for even more base rate cuts with this budget, only time will tell.
“What’s really important is that this budget considers the effect a further slowdown in property transactions might have.
“Implementing a ‘mansion tax’ or increasing Stamp Duty for part of the market, while many prospective buyers are already on pause waiting for better deals, would have a devastating effect on transaction volumes going forward, and the wider property sector.
“However, introducing another short-term policy – like Stamp Duty relief – could also hit the sector like a thunderbolt from the blue and lead to a sharp surge in purchases.
“At Movera we’re driving innovation in the property transaction process but as a sector we still have a long way to go.
“It’s crucial that whatever policies are implemented next week, they sit hand in hand with digital investment for the wider sector, to ensure that every element of the property transaction chain can build resilience and respond to peaks and troughs in activity with confidence.”
Richard Pike, chief sales and marketing officer, said: “After a year of increasing prices, it looks like inflation is finally starting to slow down, which will come as a relief to under-pressure households.
“It’s a much-needed pre-Budget boost for Rachel Reeves, who is looking for some rays of light on the economy amid the recent gloom.
“We’re all eagerly awaiting to see what she can pull out of the hat in next week’s budget to bring the economy back on track, with the Government’s position changing almost daily.
“The drop in inflation, along with a cooling labour market and the prospect of fiscal tightening in the budget, strengthens the case for the Bank of England to deliver an early Christmas present for borrowers and cut the base rate in December.
“This would help alleviate affordability pressures, unlock greater borrowing potential and support increased mortgage activity – providing a much-need boost for the market.”
Further reaction
Ben Thompson, deputy CEO, Mortgage Advice Bureau:
“The news that inflation has fallen to 3.6% provides the housing market with a much needed shot of confidence, boosting hopes for a final base rate cut of the year in December.
“This cooling of price pressures is the clear evidence the Bank of England needed. It removes the pressure for further rate hikes and shifts the conversation firmly towards when, not if, they can begin to cut the main interest rate.
“With the Autumn Budget just around the corner, there is now more room for manoeuvre. The Government must still however ensure spending decisions do not risk reversing this positive trend, and that is a finely balanced objective.
“Amidst this relief, it’s vital to focus on the bigger picture. The housing market has reset compared to three years ago: property prices are cheaper, borrowing power has vastly improved, and affordability is quietly recovering.
“Our data confirms this opportunity: the average deposit required to buy a home has decreased by 4.04% (down to £57,389) year-to-date, while average borrowing power is up 3.37% (£199,328). Essentially, if you need to move, now is not the time to delay your homebuying plans, especially as there is a lot of stock for sale in many parts of the UK right now.”
“We get that the mortgage market is complicated. That’s why a broker is your essential guide, cutting through the confusing jargon and economic turmoil to lock-in the right deal for you, and at the right time.”
George Lagarias, chief economist at Forvis Mazars:
“Growth can’t ignore the trade war and inflation can’t ignore gravity. From this perspective, today’s number comes as no surprise, bringing us that much closer to a December rate cut. All sub-components, factory input and output prices as well as inflation came in lower than expected. Given the slowdown in the housing market, it becomes more imperative for The Bank of England to act sooner rather than later.”
Neil Rudge, chief banking officer for Commercial at Shawbrook:
“After stubbornly holding at 3.8% last month, inflation edged downwards to 3.6% in October – giving consumers and businesses some respite ahead of seasonal celebrations. With the Autumn Budget being announced next week, this is also good news for the Government. However, Rachel Reeves is playing a game of tug-of-war with British businesses, championing them for investment while simultaneously making it more expensive for many to operate – with last year’s decision to raise NICs proving especially damaging.
“Whilst brighter conditions will emerge when price increases begin to ease, interest rates come down, and the budget drama blows over, business as usual continues for the nation’s SMEs. Some businesses will understandably be holding back for the time being, while others will be implementing their growth plans regardless of the macro-environment. No matter where a business lands on that, external finance remains a pivotal part of the puzzle.”
Daniel Austin, CEO and co-founder at ASK Partners:
“With inflation falling, today’s figures provide some much-needed relief. Yet with global volatility still high and domestic policy direction uncertain ahead of the Autumn Statement, all eyes will be on whether the MPC holds firm on rates next month. For homeowners and prospective buyers, lower inflation raises hopes that cheaper borrowing is edging closer, but elevated fixed-rate mortgages mean any real easing in monthly payments remains some way off. Progress is clear, but inflation is unlikely to return to target this year, keeping household confidence fragile and mortgage pressures elevated.
“In property, cooling inflation may ease some of the gloom, but it does little to shift the ‘wait-and-see’ mindset now embedded across the market. Buyers remain cautious, while developers continue to pause schemes amid unclear fiscal plans, fluctuating build costs and wider economic uncertainty. The proposed reduction in affordable housing requirements to 20%, alongside a faster planning route, could improve viability, particularly in London, but higher financing costs and tight margins are still constraining activity. Further planning flexibility and temporary levy relief would help unlock stalled sites, but demand-side measures will also be needed, from first-time-buyer support to targeted stamp duty reform.
“Resilient niches such as co-living, build-to-rent and storage remain bright spots, attracting capital thanks to structural undersupply and dependable demand. But a clear and sustained fall in inflation is the real catalyst for broader investment appetite. If easing inflation ultimately allows the Bank to begin cutting rates, momentum could return quickly. Until then, only the most agile investors will be positioned to capitalise on a cooling but opportunity-rich market.”
Kris Brewster, director of retail banking at LHV Bank:
“This is better news as stubborn inflation figures are finally easing back down, with economists expecting it to drop below the 3% barrier in early 2026.”
“But, however encouraging it is to see inflation edging down, for most households, the difference won’t yet be felt at the tills. With Christmas around the corner, many are still facing a costly festive season. Consumers still need to be proactive, from budgeting carefully to switching to high-interest current and savings accounts that can help offset the squeeze.
“With newer UK banks bringing serious competition to savings and current account rates, it also makes sense to shop around for a better deal and snap up tracker deals now before what many think could bring a 0.25% cut to Bank Base Rate on the 18th December.”
Isaac Stell, investment manager at Wealth Club:
“Having remained elevated throughout the summer, it looks as if the inflationary descent is staring to gain momentum. The possibility of a pre-Christmas rate cut is now very much on the cards.
There were mixed signals for consumers in this latest slew of data. Gas prices helped drive the slowdown in housing and household services, but food and non-alcoholic beverages made the largest offsetting contribution. Perhaps not enough yet to make the UK consumer feel flush, but positive signs of progress none the less.
All eyes now turn to the Budget. With the expected fiscal tightening in the form of tax rises a foregone conclusion, policy makers at the BoE will be watching closely to see how these measure affect growth and demand. The Bank of England stands ready to deliver a pre-Christmas rate cut if the fiscal stance does not reignite demand and the consumer will be able to raise a glass to that.“
