The Consumer Prices Index including owner occupiers’ housing costs (CPIH) increased by 8.9% in the 12 months to March 2023, a slight decrease from 9.2% in February.
Housing and household services, mainly from electricity, gas, and other fuels, as well as food and non-alcoholic beverages, contributed the most to the annual CPIH inflation rate in March 2023.
On a monthly basis, CPIH rose by 0.7% in March 2023, compared to an increase of 0.9% in March 2022.
The Consumer Prices Index (CPI) experienced a 10.1% rise in the 12 months to March 2023, down from 10.4% in February.
In March 2023, CPI increased by 0.8% on a monthly basis, compared to a 1.1% rise in March 2022.
Motor fuels, and housing and household services (specifically liquid fuels), were the primary downward contributors to the monthly changes in both CPIH and CPI annual rates.
These reductions were partially offset by upward contributions from food, and recreation and culture.
Core CPIH, which excludes energy, food, alcohol, and tobacco, remained unchanged at 5.7% in the 12 months to March 2023.
The CPIH goods annual rate decreased from 13.4% to 12.7% over the two months, while the CPIH services annual rate experienced a slight increase from 5.6% to 5.7%.
Reaction
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“Inflation remained horribly sticky in March, welded to double figures for the seventh consecutive month. While we’re expecting more falls to kick in from next month, some costs will keep rising, so the pain of inflation is far from over. It also means the Bank of England remains under pressure to keep a lid on inflation, so we can’t rule out another rate rise in May.
“The Bank will take note of the fact that core CPI stuck at 6.2% too. It’s down from the rates at the end of 2022, but it’s still too high for any real sense of comfort. However, it’s worth bearing in mind that when last year’s April energy price hike drops out of the figures next month, we’re likely to see a step down in inflation, and we’re still expecting it to be much lower by the end of the year. The figures are moving in the right direction, which is a relief after the surprise rise in inflation a month earlier.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“As ever we waited with baited-breath for the latest inflation figures, any news that may mean the Bank of England takes its foot off the interest rate accelerator would be good for the housing market. So, the news today, coupled with the fact that GDP is still not in decline, could well be the catalyst we have all been hoping for.
“The country is holding its head above water and confidence appears to be returning. Despite the lull at the beginning of the year the housing market has been picking up in recent weeks with the usual springtime boost, and more lenders are revising rates every day. There is no doubt that affordability is a worry for many households and lenders will be working around the age old of dilemma of continuing to meet lending targets versus more defaults down the line. Being prepared for both scenarios is a juggling act, but one that every lender needs to have systems and people in place to deal with.”
Andy Mielczarek, founder and CEO of SmartSave, a Chetwood Financial company:
“Although today’s CPI data shows that inflation is easing again, the latest numbers show that savers still need to plan carefully. Elevated prices mean that, without careful financial management, people around the UK are still losing money in real terms.
“Making the most of the right savings instruments is crucial. At the moment, rising interest rates mean that there are opportunities for those who are in a position to put aside a lump sum and allow that pot to grow. For those looking to secure the most competitive rates, looking beyond traditional high street banks is often the key to making better returns, while fixed-term savings accounts can provide savers with lucrative options.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“Inflation has been in double digit figures since last September and it is still stubbornly there but a fall, even if only by 0.3%, is better than nothing. Let’s hope this is the start of the downward trajectory towards the 2% target.
“But we are not out of the woods yet. Food inflation is still exceptionally high, as are energy prices although they have come down, but the energy market is very volatile so there is still price uncertainty. On the other hand, the fall in the cost of petrol bodes well for inflation if it continues to drop.
“Looking to what this will do with regards to the Bank of England base rate decision next month, the Bank has said it will be data driven and the next meeting is still a number of weeks away, but it is safe to say the days of higher interest rates will be around for quite a while yet.”
Kevin Brown, savings specialist at Scottish Friendly:
“Inflation has fallen, but this is good news for households only in the thinnest sense, because prices are still rising at an eye-watering pace, just slightly less than before. Overall prices are still rising by double digits and have been at such heights for eight months now.
“UK households are going to continue to feel the pain until either wages catch up in earnest, or price rises slow to normal levels. Essential components of household budgets such as groceries are still rising by 18% while other key areas of household spending continue to rise at painfully high rates too.
“Core inflation remains particularly stubborn at 6.2% – unchanged month-on-month. There’s a real risk of this kind of inflation becoming embedded. Once it is, then higher rates for longer become inevitable as a wage-price spiral takes hold. Falling fuel prices might provide some relief to households but this isn’t distributed evenly as not everyone drives regularly.
“Interest on savings is still well behind in inflationary terms too. Savers are being punished still despite consecutive hikes in the bank rate. Inflation has a long way to go before even the top rate savings accounts begin to look attractive again.”
John Phillips, national operations director at Just Mortgages:
“This drop to below 9% is significant and will be a welcome relief for households across the country, but especially mortgage holders.
“The bank base rate, upon which most mortgages are priced is one of the tools used to control inflation and now that this is taking effect this will hopefully remove the need for further interest rate rises which will in turn drive down mortgage rates.
“This will be especially welcome news for those mortgage holders coming off low fixed rates this year for whom the risk of a payment shock was looming large. Lenders will be able to price re-mortgages more competitively and the transition to a new deal will be more affordable.”
Paul McGerrigan, CEO at fintech broker Loan.co.uk:
“Many in the UK (not least at No’s 10 & 11) will breathe a sigh of relief at the news inflation is back on a moderate downward trajectory following February’s shock increase. Is the stability we have been promised starting?
“This week’s poll of economists by Reuters shows experts divided on whether the MPC will increase rates in three weeks’ time. A slim majority expects a quarter point rise, today’s data may change views.
“Mid-term indications are still positive. We expect the UK economy is heading for an upturn, with much lower inflation and perhaps even interest rate reductions in the latter part of this year but after the events of the last three years nothing can be taken for granted.
“It’s still a bumpy path for borrowers and expert financial advice is critical.”
Ian Hepworth, director of Croydon-based Funding Solutions UK:
“This latest inflation data is a hugely worrying statistic. March 2022 was the first full month after the invasion of Ukraine and prices spiked. Given that we are still seeing inflation at over 10% against these already inflated prices, the Monetary Policy Committee and the government are now likely to be very concerned. Further rate rises will now almost certainly be on the cards, putting further pressure on businesses and households.”
Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages:
“With inflation remaining in double digits and not slowing anywhere near as fast as forecast, everything is pointing to a further base rate increase in May. Although it is positive that there has been a slight reduction, it will likely be seen by the Bank of England as too soon to take the foot off the gas with base rate increases.”
Bradley Lay, a business finance adviser at Bradley Lay:
“Inflation is proving incredibly stubborn and the anxiety among minimum-wage workers is palpable. A large majority of the UK workforce are struggling to make ends meet and it feels like there is no end in sight. With inflation still in double digits, the pressure on those barely scraping by is becoming unbearable. It’s increasingly clear that the Bank of England’s rate increases are not a solution but a hindrance to the average household’s finances. Will the government take action to support lower earning workers, or will they be left to suffer the consequences of inflation alone? Many people must brace themselves for the harsh reality of life on the minimum wage in the face of continued high inflation.”
Abigail Foster, CEO of financial education platform, Elent:
“We are now very likely to see another slight increase in interest rates in May. Whilst this could be good news for savers if the high street banks pass this on, it’s another worrying development for people with mortgages. For investors, especially those early on in the investing space, it may start to look more favourable to leave their money in safer savings accounts with more and more banks offering upwards of 3.5% interest. Bonds are becoming far less appealing.”
Rohit Kohli, director at Romsey-based mortgage broker, The Mortgage Stop:
“This latest inflation data puts to bed any predictions of dramatic interest rate reductions in the short term. I think there will be a further rise in rates before the summer, at which point I think they will be held for a few months. It’s not great for the property market, in particular for the buy-to-let sector where stress tests still remain tight. However, with lenders out there wanting to lend and competing for business there are some deals to be had for people who are ready to buy.”
Mark Grant of Gloucester-based business finance broker, The Business Finance Branch:
“Macro global events triggered steep rises in inflation via soaring energy and food costs, and as we move beyond 12 months since these took hold we can reasonably expect a significant reduction in the inflation rate, but it’s not happening as quickly as many expected.
“Inflation has been running at well over 10% year-on-year for a while now and businesses remain under intense pressure.
“These same pressures are being felt by their suppliers, so continued support in terms of cashflow funding will be necessary to level out the cash that businesses need to pay overheads today versus their income at a later point from customer payments. Businesses that plan for price inflation will stand a better chance of riding out this cycle in our experience.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com:
“The USA is starting to see sharp falls in inflation, and I expect the UK will follow suit over the next few months, even though again we remain in double digits for now.
“Unfortunately, the Bank of England has no real choice but to raise the base rate when other central banks are doing likewise. Failing to do so would see sterling plummet against foreign currencies, further fuelling inflation as import prices rise. Hopefully we’re at the tail end of base rate hikes, and we might even see some cuts towards the year’s end.”
Andrew Gething, managing director of MorganAsh:
“It’s certainly encouraging to see inflation returning to its downward path. However, there may well be some concerns that inflation didn’t drop by as much as economists expected. While the majority were hoping to see the rate of CPI fall to 9.8%, it still remains just above 10%.
“Although it’s progress and the CPIH – which includes owner occupiers’ housing costs, also eased to 8.9%, we still could be some way from people feeling like they have greater control over their household finances. That’s especially true as food costs remain a key contributor to inflation. It will be interesting to see how the Bank of England reacts to this news when the MPC next meets in April, with another rise already priced in by many of the markets.
“The percentages are moving in the right direction, but just not fast enough for the most vulnerable of households. A sustained increase in real world costs and a potential rise in interest rates on the horizon could push more into this vulnerable category, a clear area of focus for firms with Consumer Duty. This expands the scope of vulnerability far beyond financial to include a broad range of issues such as health, lifestyle and relationship vulnerabilities.
“This will be a crucial time for lenders and brokers to ensure all borrowers are getting the advice and support they need. This all starts with monitoring vulnerability consistently.”
