UK consumer price inflation picked up in July, with the Consumer Prices Index (CPI) rising by 3.8% in the 12 months to July 2025, up from 3.6% in June, according to the Office for National Statistics (ONS). This is the highest annual rate since January 2024, when inflation stood at 4.0%.
On a monthly basis, CPI rose by 0.1% in July, compared with a fall of 0.2% a year earlier. The broader Consumer Prices Index including owner occupiers’ housing costs (CPIH) increased by 4.2% in the year to July, up from 4.1% in June.
The ONS said the biggest upward contribution to the monthly change came from transport, particularly air fares, which rose by 30.2% between June and July.
This was the largest July increase since monthly airfare collection began in 2001, reflecting the timing of school holidays.
Higher motor fuel prices also contributed, with petrol up by 2 pence per litre and diesel by 2.9 pence.
These effects were partially offset by a slowdown in housing and household services, where the annual rate eased from 6.7% in June to 6.2% in July.
Owner occupiers’ housing costs rose by 5.5% over the year, down from 6.4% in June, marking the first monthly fall in this measure since 2010.
Rent growth also slowed to 4.5%, its weakest annual increase since October 2022.
Food and non-alcoholic beverages inflation rose for the fourth consecutive month, reaching 4.9% in July, its highest since February 2024.
Restaurant and hotel prices also added upward pressure, with accommodation services driving a 3.4% annual increase in the division.
Reaction
Nathan Emerson, CEO of Propertymark:
“Unfortunately, any increase seen within the rate of inflation does brings very justified concerns to consumers, many of whom are still struggling with the cost of living, which has been steadily rising over the past few years.
“Although there is more work to be done to help ensure inflation tracks back down towards the Bank of England’s target of two per cent, we have seen three base rate cuts across 2025, which have provided instant benefit to those on tracker mortgages and additional new competitive rates from many lenders.
“It remains important that the UK Government and devolved administrations keep a tight focus on the fact that housing plays a central role in providing consistency within the UK economy and that delivering a range of sustainable housing options brings both long-term stability and an opportunity for regional growth.”
Paresh Raja, CEO of Market Financial Solutions:
“Today’s data highlights the tricky position facing both the Bank of England and the government. Bolstered by a reasonably strong July, the economy limped through Q2 with growth of just 0.4%. Meanwhile, inflation is running at almost double the Bank’s 2% target, leaving policymakers with a stark choice – cut the base rate further and risk entrenching inflation, or stick to a cautious approach and further strangle economic growth.
“What is clear, however, is that the property market is holding firm in spite of these notable issues. House prices continue to rise, while mortgage rates have edged down towards their lowest levels in years. Taken together, this should lift buyer confidence and fuel greater market activity in the coming months.
“Interest is now slowly turning to the Autumn Budget. The potential for tax hikes – and radical speculation about potentially replacing Stamp Duty with a new property tax – could start to weigh heavily on the market. So, it’s crucial that lenders and brokers continue to support borrowers as they navigate a perennially uncertain economic environment.”
Ben Thompson, Deputy CEO, Mortgage Advice Bureau:
“Another consecutive and frustrating rise in inflation was expected – nonetheless, this news is disappointing. While borrowing costs have continued to ease, there remains this delicate balance between controlling inflation and ensuring economic growth. It’s a complex picture, and July’s highly anticipated Oasis reunion tour will no doubt have contributed to these financial ripples.
“As for future rate cuts, it’s a wait-and-see situation, albeit the view is we are near or at the top in terms of inflation. Recent news regarding employment and wage growth is likely to influence decision making, as is the continued low economic growth. Until inflation looks to be under control and visibly heading on a downward path, we won’t see interest rates fall. This, however, may not be that far away, so one more cut this year remains possible.
“That being said, it’s actually a very good time to buy. The level of housing stock for sale is a lot higher than at any time in more recent years, and house prices have remained flat. With our research revealing that 61% of renters cited high property prices as the main barrier to homeownership, we need to debunk the idea that buying a home is out of reach.
“With the right information and guidance from a mortgage broker, home moves and the dream of homeownership is achievable – along with the significant financial opportunities that come with it.”
Phoebus Software’s chief sales and marketing officer, Richard Pike:
“Today’s rise in inflation adds weight to forecasts that price growth could reach 4% later this year, well above the Bank of England’s 2% target. This will, in turn, cast doubt on how quickly the Bank can move on interest rate reductions, with Governor Andrew Bailey recently warning that cuts must be made ‘gradually and carefully’. For borrowers, any delay to rate cuts means higher repayment pressures for longer, particularly for those on variable rates or coming to the end of fixed deals.
“The FCA’s recent move to ease affordability requirements may stimulate activity among prospective buyers and those remortgaging, but its true impact is yet to be felt. Many borrowers on existing deals will continue to face affordability challenges, particularly as fixed-rate terms expire. In this climate, agility is essential. Lenders that have the right technology to manage risk, respond to changing market sentiment, and deliver a seamless customer experience will be best placed to support brokers and borrowers through ongoing uncertainty.”
Matt Harrison, customer success director at Finova Broker:
“This news on top of the recent Bank of England base rate cut is going to leave many borrowers confused. Further rate cuts are now likely off the cards and mortgage rates hang in the balance. First-time buyers may hold off, but others will be looking to remortgage to lock in a fixed rate before lenders take matters into their own hands. Brokers have a crucial role to play here as many borrowers will be looking for advice on the best deals and when to invest.
“Where outcomes aren’t clear cut, brokers need time-saving tools in place so they can focus on building customer relationships and delivering that much needed guidance. At Finova Broker, our goal is to deliver systems that can be agile in an ever-changing market – centralising enquiries, streamlining compliance, and ensuring delivery where the customer is always king.”
Mike Randall, CEO at Simply Asset Finance:
“Today’s rise in inflation will be unwelcome for many, signalling higher prices across supply chains and further tightening margins. This comes at a time when businesses are still grappling with April’s NI hike, and speculation looms around further cost increases in the Autumn Budget.
“While this could dishearten some SMEs, most remain optimistic and are waiting for the right moment to invest in growth. The Government now needs to recognise the untapped potential at its fingertips and focus on the missing piece: creating an environment that fosters entrepreneurialism, rewards risk-taking, and channels funding to the firms driving recovery.”
Hannah Goldstraw, senior consultant at Barrow Mount Recruitment:
“Rising inflation, especially in essentials like food, housing and transport, continues to squeeze household budgets and shape wage expectations.
“From a recruitment perspective, this makes salary negotiations more complex, as candidates look for pay increases that reflect the cost of living, while many employers remain cautious about stretching budgets.”
Harriet Guevara, chief savings officer at Nottingham Building Society:
“Today’s CPI figures show inflation edging up to 3.8%, underlining that cost pressures remain a reality for households even as broader trends point towards gradual easing.
“For savers, inflation above most easy-access rates means cash risks losing value in real terms. That makes it all the more important to review your options. Fixed-term products and Cash ISAs, where rates remain relatively strong, can provide valuable protection, and the £20,000 annual allowance is an opportunity many are already maximising.
“This month’s inflation data will be a useful signal for households as they plan ahead, not only for everyday spending, but also for how they save and borrow in the months to come.”
Nick Hale, CEO of Movera:
“It’s not all doom and gloom for those looking to enter the housing market – or, indeed, for those on tracker mortgages. Given the FCA’s recent decision to negate the need for a full affordability assessment when reducing the term of a mortgage, we do still expect to see growth. But this may be short lived as the news today makes a further interest rate cut this year unlikely.
“As progress hangs in the balance, this is the ideal opportunity to refine processes and increase digitalisation. When the market picks up and volumes rise, resilience and capacity will be key.”
