Inflation rises to 2.9% in July – ONS

“Today’s news may bring a renewed level of concern to many individuals and families, especially over the coming months regarding household outgoings.

“Significant fiscal uncertainty, both in the UK and globally, including concerns on energy prices over coming months, is potentially likely to keep inflation rates above pre-2021 levels for now, continuing to potentially impact affordability for existing homeowners and prospective buyers as the year progresses.”

Charlie Ambler, co-chief investment officer, partner at Saltus:

“Headline inflation has ticked up to 2.9% in July, reversing the relief provided by the 2.6% reading in June. The uptick is largely driven by rising energy costs, following a 13% rise in the household energy price cap. 

“While 2.9% marks the highest reading since March, there are some encouraging signals beneath the surface. Core inflation, which strips out volatile food and energy prices, has held firm at 2.6%, suggesting that underlying domestic price pressures are not accelerating.

“Despite the Bank of England leaving rates unchanged this year, policy remains finely balanced. With inflation far exceeding target, and now rising again, there is a chance, albeit remote, of a rate hike in September. However, we think a single increase to 4% by the end of the year is more realistic, as energy-driven inflation is very different in character from demand-driven inflation and the Bank will likely want to keep its options open.

“For investors, the question is now how far rates will rise. Portfolios built for a falling rate environment will need to adapt, particularly in rate sensitive areas like gilts and domestically focused equities. Long term returns are driven by maintaining diversified exposure to quality assets, and investors should not lose sight of the need to prioritise quality and resilience.”

Ben Thompson, director of home moving strategy at Mortgage Advice Bureau:

“After last month’s surprise fall, an inflation bounce-back was always likely. Fuel prices have been climbing again since the last reading, so today’s rise doesn’t really tell us anything we didn’t expect. What actually matters is what this does to the Bank of England’s next move, because that’s what changes the mortgage deals available.

“First time buyers should know that lenders don’t price fixed deals against today’s rate – they price them against where they expect rates to go next. That’s why inflation data can impact what’s available before the Bank does anything at all. 

“The read is similar for anyone remortgaging, but the stakes are higher. If your current deal ends in the next few months, lenders typically start repricing in the run-up to a Bank decision, not after it. So, waiting to see what happens at the next base rate announcement in September could mean missing the deals that were only available beforehand.

“If you’re moving home, none of this should change your plans. However, it’s worth checking your numbers against a rate that’s a little higher than you’ve budgeted for, so a shift in borrowing costs doesn’t catch you out between now and completion.

“We talk customers through exactly this kind of decision every day, working through what a rate change actually means for their numbers, what their options look like, and what the timing means for their specific move. It’s the kind of detail that a headline figure can’t give you, which is why it’s worth speaking to a mortgage adviser before you commit to anything.”