The Consumer Prices Index (CPI) rose by 3.8% in the 12 months to August 2025, unchanged from July, while the monthly rate was 0.3%, the same pace as August 2024.
Core CPI slowed to 3.6% from 3.8% in July, with goods inflation edging up to 2.8% and services inflation easing to 4.7%.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) increased by 4.1% in the 12 months to August, down from 4.2% in July, with a monthly rise of 0.3% versus 0.4% a year earlier.
Owner occupiers’ housing costs rose by 5.3% year on year, easing from 5.5% in July, and have slowed for seven consecutive months.
Air fares made the largest downward contribution to the monthly change in both CPIH and CPI annual rates, reflecting a smaller rise than a year earlier.
Partially offsetting this, restaurants and hotels, and motor fuels made large upward contributions.
Within transport, motor fuel prices still fell 4.9% year on year, but by less than the 6.7% decline in July.
Food and non-alcoholic beverages inflation picked up to 5.1% from 4.9% in July, the highest since January 2024, with small upward effects from vegetables, milk, cheese and eggs, and fish.
CPIH goods inflation rose to 2.8%, its highest since October 2023, while CPIH services inflation slowed to 4.9%, its lowest since July 2022.
Housing and household services continued to make the largest contribution to the CPIH annual rate at 1.79 percentage points, down from 1.82 points in July.
Reaction
Simon Webb, managing director of capital markets and finance at LiveMore:
“With the market widely expecting inflation to rise, today’s figures will be seen as a surprising but positive development. While it’s unlikely the Bank of England will respond immediately and cut rates tomorrow, steady progress towards the target of 2% inflation could create the space for rate cuts later in the year.
“For borrowers, particularly those in later life, this could bring a renewed sense of stability and confidence when it comes to financial planning. We know many over-50s are still navigating borrowing well into retirement, often while balancing other responsibilities such as caring or part-time work.
“As the outlook improves, it’s an opportunity to reframe the conversation around later life lending, not as a niche market, but as a growing and diverse segment requiring thoughtful, long-term financial solutions.”
Matt Harrison, customer success director at Finova Broker:
“Stability is something but it’s unlikely to trigger a surprise base rate cut tomorrow. Many clients will still err on the side of caution and wait for the smoke to clear before borrowing if they can help it.
“During this period of calm, brokers will need to be agile. This is no time to wait for new business to fall into your lap. Those who can demonstrate added value will catch the eye of clients still prepared to invest. With the interconnectivity provided by the Finova Broker CRM, brokers can be proactive when it comes to spotting a remortgage or product transfer opportunity, while the efficiency and compliance tools carve back time to focus on nurturing relationships with your client base.”
Phoebus Software’s chief sales and marketing officer, Richard Pike:
“The markets were widely expecting inflation to rise this month so today’s news will be a momentary boost. However, it’s still expected to hit a 4% high before the end of the year and with affordability also dropping through the floor it seems almost certain the Bank will hold interest rates steady tomorrow.
“With inflation stubbornly high and the jobs market persistently weak, all eyes are now on the budget and how Rachel Reeves will attempt to bring the economy back on track. If she wields the axe on homeowners through property tax reform, the key question will be what knock-on effect that has on industry growth.”
Ben Thompson, deputy CEO, Mortgage Advice Bureau:
“While inflation holding means we’re still some way from the 2% target, it suggests that the bumpy ride may be leveling out. It’s widely believed that we’re nearing the peak, and this result supports the idea that a gradual decline is on the horizon.
“We know that these rising costs can make saving feel impossible. Our latest research confirms this, showing that 56% of renters see saving for a deposit as the biggest hurdle to homeownership. The good news is the days of needing a massive deposit are behind us. Thanks to increased borrowing power and the greater range of innovative products available, now is an excellent time to explore your options.
“With the expert guidance of a mortgage broker, homeownership is closer in reach than you think. They can help you navigate the market and find a deal that fits your unique financial situation, including the range of low or no deposit mortgages available.”
Daniel Austin, CEO and co-founder at ASK Partners:
“Today’s unchanged UK inflation to points to a bumpy and uncertain road ahead. Policymakers are caught between volatile global conditions, exacerbated by ongoing uncertainty, and shifting domestic policy. Markets still expect another rate cut before year-end, but with the Autumn Budget looming, the MPC is likely to hold fire until there’s clarity on the Chancellor’s fiscal plans. A premature move would be a leap of faith.
“For homeowners and buyers, the hope of lower borrowing costs lingers, yet persistently elevated fixed mortgage rates mean relief is not imminent. With inflation unlikely to return to the 2% target this year, mortgage pressures look set to persist. Investors and developers will also be watching closely.
“Resilient sectors such as co-living, build-to-rent and storage continue to attract capital thanks to tight supply and strong demand, but a stable downward inflation trend is critical to unlocking broader activity. Should the predicted BoE cuts arrive, they could act as a spark, but for now, only the most agile investors may find opportunities in a cooling market.”
