UK inflation remained unchanged in August, with the Consumer Prices Index (CPI) rising by 3.8% in the 12 months to August 2025, the same rate as July, according to the latest data from the Office for National Statistics.
On a monthly basis, CPI increased by 0.3%, mirroring the rise seen in August 2024. The Consumer Prices Index including owner occupiers’ housing costs (CPIH) also eased slightly to 4.1%, down from 4.2% in July.
The figures show that inflation remains above the Bank of England’s 2% target, though recent data suggest price pressures are gradually easing.
Air fares made the largest downward contribution to the monthly change, while restaurants, hotels and motor fuels provided offsetting upward pressures.
Core CPIH, which excludes energy, food, alcohol and tobacco, stood at 4.0%, down from 4.2% in July.
Richard Pike, chief sales and marketing officer at Phoebus Software, said: “While it’s positive to see that inflation hasn’t risen as much as the markets were expecting, it remains stubbornly high, with the 12-month CPI expected to be 3.8% by the end of 2025, well above the Bank of England’s target of 2%.
“With the Bank taking a ‘gradual and careful’ approach to easing monetary policy, it’s likely to be next year now before we see a cut in the base rate.
“We’ve seen mortgage rates ticking up in recent weeks but the good news for homebuyers is that they remain substantially lower than a year ago.
“However, with growth and productivity weak, and UK businesses and households highly cautious, Rachel Reeves needs to pull a rabbit out of the hat in the upcoming budget to balance the books without fuelling further inflationary pressures with potential tax rises.”
Matt Harrison, customer success director at Finova Broker, said: “It might be sticky but inflation holding steady – and not hitting the Bank of England’s 4% forecast – is a pleasant surprise.
“Rachel Reeves has warned that her Autumn Budget has required some ‘tough decisions’, but it’s crucial now that offsetting measures are introduced to avoid further inflationary damage from whatever tax amendments the budget is due to trigger.
“While many looking to buy or sell wait with bated breath for the budget’s outcome, its important the property market keeps transactions moving as fast as possible.
“In the current climate, brokers must look beyond the best interest rates to lenders that can deliver in terms of speed and service.
“Until the budget dust settles and we get some good news from the Bank of England, locking transactions in with those who are willing to take the risk will be key.”
Simon Webb, managing director of capital markets and finance at LiveMore, said: “The fact that inflation has held steady this month will be welcome news for households suggesting that the Bank of England’s cautious approach is continuing to pay off.
“Stability is exactly what the markets were hoping for, and it reinforces expectations that price pressures are gradually being brought under control.
“The Bank will likely remain measured in its approach to base rate cuts, until there’s sustained evidence that inflation is on a clear downward path.
“For the later life lending market, this period offers an opportunity for borrowers to review their options and take advantage of a more settled outlook.
“Many over-50s are making financial decisions that span decades, so it’s important to focus not only on short-term movements but also on long-term resilience, ensuring that older borrowers have access to flexible, sustainable borrowing solutions as the market stabilises.”
Further Reaction
Rachel Geddes, strategic lender relationship director, Mortgage Advice Bureau:
“While inflation holding steady at 3.8% reflects the persistent pressures from political uncertainty and elevated costs, the mortgage market continues to remain resilient. In fact, many don’t realise they’re now in a prime position to get onto the property ladder – especially compared to this time last year, or even six months ago.
“A ‘keep calm and carry on’ approach is needed here. While inflation remains well above the 2% target, the housing market remains in a strong place, and more aspiring buyers than ever are realising that they can get on the ladder sooner.
“Affordability is improving, and customers are benefiting from higher average borrowing limits and a wave of new, innovative products. First-time buyer appetite is strong, with a 9.7% uplift on the number of mortgage applications year-to-date.”
Nathan Emerson, CEO of Propertymark:
“We still sit within a phase where the economy remains sensitive, both domestically and globally. We have seen inflation trend back upwards over the last twelve months; however, we are thankfully in a much better position than we were only three years ago, when the rate of inflation sat at 11.1%.
“The Bank of England is still in a challenging position when it comes to making any calls to further reduce the base rate currently. However, there is widespread optimism into the new year that we could see the Monetary Policy Committee consider new dips in the base rate, all of which should help provide additional affordability for many consumers regarding housing.”
Nick Hale, CEO of Movera:
“With inflation firmly stuck at 3.8%, only time will tell whether this is the peak of the inflation curve, beating the Bank of England’s most recent forecast. But with the Autumn Budget round the corner, another base rate cut remains unlikely – now is the time to get property transactions moving again.
“Buyers may still be hesitant, but conditions are unlikely to improve. Brokers should take this opportunity to reach out to clients waiting for clarity and emphasise that mortgage rates are unlikely to drop this side of the new year – grabbing a deal now before the Autumn Budget could be the way forward. Meanwhile, for conveyancers, ensuring process efficiency through data sharing and digital solutions will be the key to progressing transactions as quickly as possible and generating some momentum in the market, despite today’s news.”
“With inflation firmly stuck at 3.8%, only time will tell whether this is the peak of the inflation curve, beating the Bank of England’s most recent forecast. But with the Autumn Budget round the corner, another base rate cut remains unlikely – now is the time to get property transactions moving again.
“Buyers may still be hesitant, but conditions are unlikely to improve. Brokers should take this opportunity to reach out to clients waiting for clarity and emphasise that mortgage rates are unlikely to drop this side of the new year – grabbing a deal now before the Autumn Budget could be the way forward. Meanwhile, for conveyancers, ensuring process efficiency through data sharing and digital solutions will be the key to progressing transactions as quickly as possible and generating some momentum in the market, despite today’s news.”
George Lagarias, chief economist at Forvis Mazars:
“We may be seeing the first evidence of inflation finally meeting resistance. Given expectations for an inflation uptick, it’s good news that it remained stable. Importantly, we are seeing prices down in food, beverages, recreation and culture.
“With unemployment rising, it is now more difficult for inflation to continue its stride upwards, and easier for the Bank of England to consider lowering rates.”
Kris Brewster, Director of Retail Banking, LHV Bank:
“Today’s inflation figure shows that price pressures remain stubborn, reminding households why it’s vital to make their money work harder. Now is not the time to leave hard-earned cash sitting idle. Whilst monetary policy remains volatile, moving your money into an interest paying current account is now another genuine option alongside shopping around for better savings rates.
“Despite a rise in precautionary saving, too often money is left sitting in low-interest current and savings accounts, losing value in real terms. To take on inflation, savers need to shop around for a better bank account that earns a return on their day-to-day money and best buy savings accounts with flexibility and convenience rather than accepting 0 per cent returns. Gone are the days when people should accept poor rates from their existing bank. You can now earn interest on every penny you deposit in a bank to combat the effects of inflation.”
