Inflation eases but remains above 10% – credit industry reaction

The consumer prices index (CPI) measure of inflation fell to 10.1% in the year to March from 10.4% in February, according to the Office for National Statistics (ONS). The static inflation was driven by food prices rising at their fastest rate for 45 years.

Commenting on inflation figures for March, ONS Chief Economist Grant Fitzner said “Inflation eased slightly in March, but remains at a high level. The main drivers of the decline were motor fuel prices and heating oil costs, both of which fell after sharp rises at the same time last year. Clothing, furniture and household goods prices increased, but more slowly than a year ago.”

“However, these were partially offset by the cost of food, which is still climbing steeply, with bread and cereal price inflation at a record high. The overall costs facing business have been largely stable since last summer, although prices remain high.”

Richard Lane, Director of External Affairs at StepChange said “It’s positive to see inflation finally going in the right direction, but with energy prices fixed until July and inflation on food and other essentials still running well above 10%, the news will be of little solace to the millions of people who have endured blow after blow to their finances over the past three years.”

“Since March 2020, the number of people struggling to keep up with household bills and credit commitments has nearly tripled, rising from 7.5 million people to 22 million people. For many, the increased strain of soaring prices will mean making difficult decisions between keeping the lights on or putting food on the table.”

“Demand for our services is rising fast and Government must be ready to support those facing financial hardship and rapidly escalating levels of debt. Pausing punitive deductions to benefits would be an effective and easy way to help those on the lowest incomes through this difficult period. Meanwhile, energy bills are simply unmanageable for thousands of households, so we’re calling for targeted funding to write-off arrears for people who cannot afford to repay. In the longer term, a social tariff for energy would act as a permanent solution to protect financially vulnerable households from debt and fuel poverty.”

Joanna Elson CBE, Chief Executive of the Money Advice Trust said “Today’s figures may show a small drop in inflation, but costs remain high, and will continue to bear down on households that are struggling or falling behind on their bills. Our advisers at National Debtline and Business Debtline continue to hear from people whose budgets simply can’t stretch any further to cover their essentials. For many people already in financial difficulty the damage has been done, and for many more the impact of sustained high prices will continue to be felt.”

“I would urge anyone worried about their finances to contact a free, independent debt advice service like National Debtline as soon as possible. Our advisers will be able to take you through your options and your next steps.” 

John Phillips, National Operations Director at Just Mortgages said “This drop to below nine precent 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.” 

Andy Mielczarek, Founder and CEO at Chetwood Financial said “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.”

Alastair Douglas, CEO of TotallyMoney said “Inflation remains at sky-high levels, and is still a long way off the Bank of England’s 2% target. Meanwhile, people’s finances are being pushed to the brink, resulting in an increase in defaults on credit cards, loans and mortgages — a trend which is expected to continue over the next three months.”

“The government needs to provide a long-term coherent plan, which offers prolonged protection. The vulnerable need support, and not the reintroduction of prepayment energy meter force-fittings as announced yesterday, or being exposed to this month’s barrage of bill hikes. And with nearly nine million adults struggling to cover everyday essentials — this is no small problem.”

“Letting inflation run wild, and encouraging an increase in defaults will make it more difficult for people to access affordable forms of credit in the future — having a negative impact on their finances for years to come.”

Simon Webb, Managing Director of capital markets and finance at LiveMore said “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.”

Sarah Coles, Head of Personal Finance at Hargreaves Lansdown said “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.”

James Smith, Research Director at the Resolution Foundation, said “Many countries have experienced big recent falls in prices pressures, but Britain has not followed suit and remains mired in double digit inflation. Headline inflation should fall sharply next month as the effect of last April’s energy price spike falls out of the data. But the acceleration of food price inflation to nearly 20 per cent is a major cause for concern, particularly for low-income families who spend a far greater share of their income on food than richer households.”