
The Office for National Statistics (ONS) has published its latest Consumer Prices Index, which shows that the rate of inflation fell to 2.3 percent in the 12 months to April 2024, down from 3.2 per cent in March.
Prices were up 0.3% in a month (compared to 1.2% a year earlier). CPI is the lowest since July 2021, and well down from the peak aof 11.1% in October 2022. The biggest factor pushing inflation down was energy prices, followed by food, and the biggest push in the opposite direction came at the petrol pumps.
Core CPI inflation (stripping out energy, food, alcohol and tobacco) was 3.9%, down from 4.2% in March. The CPI services rate eased from 6% to 5.9%.
Commenting on the date, Steve Vaid, Chief Executive of the Money Advice Trust said “Inflation levels are down, however millions of households continue to face unaffordable debts. Energy debt levels alone remain staggeringly high. Support is still needed for people facing unmanageable energy arrears.
“A Help to Repay scheme, including repayment matching, as some energy providers are now recognising, would help bring down energy debt levels for those most severely impacted.”
Simon Webb, Managing Director of capital markets at LiveMore, said “Inflation has fallen again, reaching 2.3% in April, down from 3.2% in March. This continues the welcome trend we’ve seen since the October 2022 peak.
“This sustained decline reflects real progress towards the Bank of England’s 2% target. While still some way to go, this is a significant improvement on the inflationary pressures of the past year.
“Core inflation, a key metric for the Monetary Policy Committee, reflects this downward trend as well. This data should provide some breathing room for the MPC regarding interest rate decisions.
“We remain optimistic about the UK’s economic recovery, albeit a gradual one. But we recognise that older borrowers and mortgage prisoners will still be feeling the pressures of the continuing high cost of living. We encourage them to seek well-informed advice to capitalise on opportunities presented by this improving economic climate.”
Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said “The news that inflation has dropped to within touching distance of the Government’s 2% target will come as a great relief to many. However, now is not the time for premature celebration.
“People mustn’t be swayed into thinking the economy is ‘back to normal’; caution should be exercised. Prices and core inflation are still at high levels. The long-lasting effect of a high-inflation environment cannot be reversed in one fell swoop, and those who are still battling with expensive household bills and repayments must continue to be proactive with their finances.
“With the 2% target within reach, the Bank of England will no doubt be considering interest rate cuts in the coming months. So, people should take advantage of the current positive savings outlook, explore their options and maximise their returns before they lose their opportunity.”
Alastair Douglas, CEO of TotallyMoney said “While the news that inflation’s slowing is clearly a good thing, it doesn’t mean life is getting any easier. The cost of living isn’t getting any cheaper — it’s just taking longer to get more expensive — meaning it’s likely that the millions of people who were struggling a year ago, still are today.
“Although the Bank of England and government might both claim victory over the war on inflation, the truth is that mortgage arrears and repossessions are rising, unemployment is increasing, and 2.8 million adults are unable to work as a result of long term sickness. Inequality is growing, and it’s impacting people’s wellbeing.
“The financial services industry has its own role to play, and it must start using technology as a force for good, giving customers free access to their own personal data, so they can take action and start moving forwards. Too many firms are focussed on prime audiences, crypto trading, or making spurious AI claims, while overlooking more than 20 million under-served adults who are in desperate need of their support.
“And even though there’s a lot of talk around rate cuts, it’s important to remember that if and when it does happen, it’s unlikely it’ll suddenly drop below 5%. Higher rates are here to stay, and each day, more than 4,000 homeowners face a fresh financial shock when their existing fixed-rate deal comes to an end. Back in 2019, the average five year fix was 2.89%, and now the average 2 year deal is more than double that, at 5.91%.
“If you’re struggling to keep up with your mortgage payments, then contact your lender as soon as possible. The regulator has told them they must act in your best interest, offering flexibility so you can better manage your borrowing. It won’t impact your credit score, but missing payments can, and you could end up losing your home. So don’t delay.”
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown said “The hot mess of inflation has cooled, but it’s not quite at the perfect temperature, which means an immediate interest rate cut looks set to remain elusive. This has been reflected in the pound shooting further above $1.27 as the reading came through
“Reaching this lower level has been a long time coming. The last time inflation was closer to 2% was in July 2021, when Covid restrictions were easing off, nightclubs were reopening and socialising was no longer limited. Football fans were out in force for the Euros and ‘Three Lions’ was back at the top of the charts. Demand was unleashed, helping push up prices, and inflation soared to 5.3% by the end of the year.
“But it was the outbreak of the war in Ukraine which sent commodity prices sky high and unleashed the worst of the cost-of-living crisis, with inflation careering upwards to above 11% in October 2022.
“As interest rates have shot up, putting a vice-like grip on household budgets, demand has been squeezed out of the economy, but external inflationary pressures like energy costs have also eased off. Even though inflation coming close to target is clearly highly welcome, it doesn’t automatically mean inflation has been relegated from the league of threats. Bank of England policymakers won’t be pulling on winning jerseys just yet. They will want to see more signs that hot wage inflation is also cooling off, before they blow the whistle on this restrictive period of play.
“It looks increasingly likely that a rate cut may still not come until August. Even so, it’s more stable ground for investors in the UK. As inflation falls back, they are enjoying the double benefit of recovering capital values and dividend yields above the rate of rising prices, with a typical UK All Share tracker yielding 3.5%.’’
Sarah Coles, Head of Personal Finance at Hargreaves Lansdown said “Energy prices powered the fans cooling inflation this month, after the energy price cap was slashed an impressive 12% at the start of the month. The drop from a year earlier is even more striking, because for the average household, prices are down £238 in a year to £1,690. It’s still a huge increase on the levels we saw before the invasion of Ukraine – when the cheapest deals cost around half this amount – but it’s a real shot in the arm for anyone trying to make ends meet.
“It’s worth noting that we’re expecting another cut in July – to around £1,574. However, this is actually going to help push inflation higher, because we’ll be comparing it to a year earlier, when the price cap was £2,074. So this summer we can look forward to the odd combination of falling energy prices actually pushing inflation up.
“Food prices continued to feed lower inflation – with prices up just 2.9% in a year – down from 4% a month earlier, and from a high of 19.2% in March 2023. It’s the lowest this rate has been since November 2021, and is the result of food inflation easing for 13 consecutive months.
“The typical trolley will contain a mixture of price movements. Milk, butter, poultry and fish are actually cheaper than they were a year earlier – thanks to falling fertiliser prices and tougher negotiations from supermarkets on own brand items. Meanwhile, olive oil is up 41.7%, cocoa up 19.6% and crisps up 7.7% – thanks to a combination of disappointing harvests and solid demand.
“Second hand cars also helped depress inflation. Prices actually increased 0.5% in a month, but were down an impressive 10% in a year – compared to a fall of 8.1% in March. Demand has been unwinding for the past nine months. It seems that the vast majority of those who decided they needed a second hand car already have one on the drive by now.
“On the flip side, petrol prices were on the rise again – putting upwards pressure on inflation. The average petrol price was up 3.3p per litre in a month to 148.1p per litre. Diesel was up 3p to 157.1p per litre. Overall, petrol prices were still 0.3% lower than a year earlier, but the annual gap has been narrowing.
“It feels like this should be a healthy dose of good news, but anyone with a mortgage will be sickened to hear it’s not as good as it seems. For anyone on a variable rate mortgage, nothing will change until we get rate cuts, and the timing of those still hangs in the balance. We can’t completely rule out a June rate cut, but it looks distinctly like there are still a few months before your mortgage bills drop.
“For those who need to remortgage in the near future, there’s no respite either. Fixed mortgage rates had been moving in the wrong direction for months. Moneyfacts figures show the average two-year fixed rate rose from 5.56% at the end of January to 5.93%. There is still hope that lower inflation will inspire some to price in an earlier cut, but we may not see any significant change in the market for a while.
“In the interim, higher mortgage rates have taken their toll. The HL Savings & Resilience Barometer shows that the average household with a mortgage spends £16,943 on essential housing costs, almost two thirds more then those who own outright and over a third more than those who rent, so it’s no surprise so many are holding their breath for cheaper mortgage deals.”