Inflation has increased to 3.5% on the Consumer Price Index (CPI) measure of inflation according to the Office for National Statistics (ONS).

The rate at which prices rise on average has increased by more than anticipated, up from 2.6% in March 2025.

Chief among price rises leading the rate higher were energy prices (thanks to the increase in the energy price cap), transport cost increases and household services.

Core inflation – which removes more volatile prices such as for food, energy, alcohol and tobacco – increased by 3.8%, while prices for services rose by 5.4%.

More from Edmund Greaves

Bank of England and Government under pressure

The unexpectedly high increase in inflation has put pressure on the Bank of England and the Government – both of whom have a critical role in managing both price rises and economic growth.

The Bank of England last week cut its base rate to 4.25%. But this week the Bank’s own chief economist Huw Pill warned that it would have to slow its pace of cuts in order to ensure it does not lose control of inflation again.

Before the most recent inflation report, investment markets anticipated that the bank rate would fall to 3.5% by the end of the year. But it has reined in this forecast to an average expectation of 3.9%.

The Government meanwhile is coming under renewed pressure as April’s spike was affected by increases in National Insurance, living wage levels and other tax increases such as council tax.

Bad news for savers and mortgage buyers

The spike in inflation is also potentially bad news for both savers and mortgage buyers.

Savers now face falling rates thanks the Bank of England base rate cuts while inflation steadily eats into their savings returns. While savers can still find inflation-beating rates on the market, the number of accounts is dwindling as providers cut their offers.

Mortgage buyers have benefited from recent cuts in the mortgage market as lenders attempt to position themselves more competitively while the base rate comes down.

But with the pace of cuts now in doubt, it is likely that the number of improved deals could slow precipitously.

Savers need to consider if their long-term savings might be better put to use via investments, while mortgage shoppers should ensure they are looking for the best deal possible and speaking to a broker who can help find the best mortgage for their situations.

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Inflation is a financial concept that describes the overall increase in the prices of goods and services within the economy over a specific period. When inflation occurs, the purchasing power of money declines, meaning that the same amount of money can buy fewer goods and services compared to a previous time period. 

In the UK, inflation is typically measured as an annual percentage change in the Consumer Prices Index (CPI), Consumer Prices including Housing (CPIH) or the Retail Prices Index (RPI). These indices track the average price changes for a basket of goods and services commonly purchased by households. 

Inflation is influenced by a variety of factors, including changes in consumer demand, fluctuations in supply chain costs, government fiscal policies, and global economic conditions. Central banks, such as the Bank of England, play a crucial role in managing inflation. They often set interest rates and employ other monetary policy tools to control inflation and promote economic stability. 

A moderate level of inflation is generally considered normal and can be conducive to a healthy economy. It encourages spending and investment while preventing deflation, which is a sustained decrease in the general price level. However, excessive inflation can erode the value of money, disrupt economic planning, and lead to uncertainties in financial markets. 

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Since when were decent wage rises a bad thing? Since this week it would appear.

As of January to March this year, according to the figures release on Tuesday by the Office for National Statistics, wages rose (excluding bonuses) by 6%.

Taken against the current CPIH inflation (the ONS’s preferred measure) of 3.8% and we’ve got 2.2% real terms pay increase, on average, for British workers. This means Brits are getting a proper pay rise for the first time in many years.

Now, we last had real-terms wage rises in 2021, so it wasn’t that long ago – but this was mostly cancelled out by monstruous inflation in 2022/23. Collectively even if we’re getting pay rises in earnest, there is still some way to go to get back ahead of the price increases we’ve all felt.

There is a longer-term story here though and the ONS’s own figures illustrate this. In the graph below, you can see real pay growth vs CPIH inflation.

When the blue and orange lines are higher than the zero-axis line, this means real pay was growing. The post-2008 drop off is clear, and there has been no consistent reversal since despite a couple of spikes.

This is confirmed by research from from the Trade Union Congress (TUC), whose recent figures suggest real pay hasn’t really moved in about 16 years. The TUC says the average worker in the UK would be £200 a week better off if pay had grown at the same as its pre-financial crisis rate.

What is going on here? And why are real-terms wage increases (i.e. people becoming better off) treated like a bad thing by the Bank of England and other vested interests?

Read more by Mouthy Money editor Edmund Greaves

Why we all got poorer

The reason why the news of strong wage growth is being touted as bad news is because it is evidence of a ‘wage price spiral’.

In effect, wages are rising due to a labour shortages and workers being more assertive in the face of soaring costs.

But productivity (i.e. how much the average worker makes) isn’t increasing at the same time. So we’re being paid more but not producing more as a result.

Economists treat this kind of wage increase as ‘inflationary’ because it means the economy isn’t actually growing, there’s just more money sloshing around inside it.

This means the Bank of England, which watches all of this very closely, is likely to maintain its bank rate higher as a result. The bank is worried that if we’re getting more pay rises then we’ll just spend it and this will perpetuate more price rises.

But maybe…just maybe…the reason that people are getting proper pay rises now is because we’ve had enough of below inflation pay settlements and have finally found our collective voices. We’re tired of the erosion of our living standards and now we have the power to say enough is enough.

The 2010s were a decade marked by below-inflation pay rises. This was a core pillar of austerity government and a deliberate policy decision our leaders made.

The idea was this – in the post-GFC world government and big business couldn’t afford to hand out pay rises that matched inflation, and needed to control costs because, well, they were pretty broke.

This led to a novel idea whereby instead of saying to workers “no you can’t have a pay rise this year” you gave them a pay rise, but you give them an under-inflation pay rise. For example, if inflation was 3% – you’d give your employee 1.5%. It’s something and enough to quieten any immediate discontent.

But it is in effect a cost-cutting measure as over time it will reduce the business/government salary bill as income from goods and services (or taxes!) rises.

It is a way of softening the blow while also making the balance sheet look better.

It is a boiling frog strategy.

This idea was the lovechild of behavioural economists, illustrated in the book Nudge (published in 2009) and the ‘Nudge Unit’ which was created by the Coalition Government in 2010.

It became a widespread tactic used by Government entities and businesses all over the UK to slash their wage bills.

It was so effective the economy had basically become addicted to it, as the ONS wage data shows all too clearly. This attitude reached its perverse peak in 2022 when Bank of England Governor went to the press to beg workers not to ask for pay rises.

The Russian invasion of Ukraine was days away at this point, and the ensuing energy crisis turbocharged the inflation crunch. But that crunch was ultimately the product of the Bank of England, in cahoots with the Government, printing money into oblivion to pay for the pandemic.

And this leads us to today, where the labour market is tight, workers are getting actual pay increases and the economic ‘theory’ for getting away with meagre pay rises appears dead in the water.

It is bad news, but only if you’re a bean counter who doesn’t care about the human cost of eroding people’s earning, a business owner seeing your profits curtailed, or a government finding it harder to limit costs. Sound familiar?

At this point, if higher wages means higher rates then so be it. The era of (effectively) zero rates should never return as an idea anyway because it promoted irresponsible borrowing and an unhealthily debt-fuelled economy. It caused the inflation that has had to be confronted.

Higher rates will enforce financial discipline on business, government and households, and that is ultimately not a bad thing.

Photo by Robert Bye on Unsplash

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Argentina is perhaps most famous for its passionate football fans and winning team, its gauchos, big steaks and red wine.

But the country has more recently been making headlines for the wrong reasons, thanks to one of the highest rates of inflation in the world.

In the latest Mouthy Money podcast, host Edmund Greaves caught up with Trevor Schrock, an Argentine-American living in Argentina during the country’s worst inflation crisis of modern times.

From seeing a litre of beer rise from $6 pesos to over $1,000, to why there’s a “Coldplay” exchange rate, Edmund and Trevor get to grips with how astronomical inflation affects normal people in Argentina – from slumping pay packets to credit card shenanigans and splashing the cash on restaurant dinners.

Trevor explains how the new Argentine government, headed by radical economist Javier Milei, is looking to shrink the size of the state, stop printing money and stabilise the economy to fix its inflation woes.

As a bitcoin educator Trevor also has some insights into how bitcoin could be the solution ot Argentina’s long-held problems.

This episode is the part one of a two part series looking at how extreme inflation affects normal people. Episode two will consider if modern technological solutions such as bitcoin could one day be the answer for failing currencies such as the Argentine peso.

You can hear the full podcast episode on Spotify or Apple.

Photo by Alvaro Camacho.

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Must know money focuses on the financial news you need to know. Here’s why inflation falling unexpectedly it matters.

Inflation has surprised with a small drop, slowing to 6.7% on the consumer price index (CPI) measure.

The fall was largely as a result of what the Office for National Statistics (ONS) calls “erratic” cost of overnight accommodation and air fares which both saw falls in August.

Food prices are also rising more slowly than 12 months ago.

The inflation figure has surprised everyone because rising petrol and diesel prices were predicted to be enough to send the index up.

But this wasn’t the case in the end as fuel price increases didn’t outweigh other falls.  

Why does inflation matter?

Inflation tracks the speed at which prices of everyday products and services rise and give us a good indicator of what is happening in the economy.

Lower inflation doesn’t mean prices are falling. They are still rising, just a little more slowly than before.

This is also measured in pure averages – the individual costs of things you muy and how those prices change vary enormously by your own experience.

Broadly, when inflation is too high, everyone has too much money chasing too few goods and services. This can “overheat” the economy and cause a recession.

Experts are now worried that wage growth, which is outpacing inflation for the first time in many years, will help to embed fast-rising prices for longer.

This is all well and good, you say, but I’ve got a pay rise and it is a relief to have more money. And that is true.

But inflation has already damaged the economy in the past two years and made life more expensive for everyone beofre pay rises even began to catch up.

Economists are (often rightly) accused of not thinking about how real people react to such events, but they will tell you that gentle rising inflation and gently rising wages are much less problematic for the economy, and much more sustainable.

Inflation and wages ultimately dictate what level the Bank of England sets its base rate of interest at. The higher that rate, the more expensive financial products such as mortgages and loans will be for families.

The next time that happens is tomorrow when the bank could well raise rates to 5.5%.

Photo by Martin Péchy.

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Since the 2020 global pandemic, the UK has grappled with a very challenging economic landscape.

Inflation has surged to unprecedented levels of over 10%, causing the cost of living to soar and placing immense pressure on households nationwide.

As if this weren’t enough, the response from monetary authorities has been increases in interest rates, a move aimed at taming inflation but one that comes with its own set of repercussions.

In this blog post, we delve into the consequences of rising interest rates on UK households and examine how this measure has inadvertently pushed many into debt.

Before we delve into the impact of rising interest rates, it’s crucial to understand the context of the soaring inflation that has sparked this chain of events.

A combination of global supply chain disruptions, increased energy costs, and pent-up demand following pandemic-related restrictions has led to a surge in consumer prices. As a result, families across the UK have encountered higher prices for essentials such as food, fuel, and housing.

The Bank of England resorted to increasing interest rates to curb inflation and stabilise the economy. While this move aimed to rein in spending and borrowing, it inadvertently caused a domino effect that reverberates through households struggling to make ends meet.

Mortgages, loans, and credit card balances are all linked to the interest rate set by the central bank. As this rate climbed, so did the monthly payments for these financial commitments.

The rising interest rates translated into increased financial strain for many households. Mortgages, often the most significant financial commitment for families, have become more expensive to service.

Those on variable-rate mortgages deal with higher monthly payments, potentially stretching their budgets to the breaking point. Even fixed-rate mortgages are not immune, as prospective homeowners face higher borrowing costs when entering the property market.

Consumer loans, including personal and credit card debt, have also taken a hit as interest rates climb.

As the cost of servicing these debts increases, families are left with less disposable income to allocate towards other necessities, prompting some to rely on credit to cover daily expenses, thereby perpetuating a cycle of debt that becomes increasingly difficult to break free from.

While raising interest rates was intended to encourage saving and discourage spending, the reality was often more complex. Although savings accounts may offer slightly better returns, they still struggle to outpace the rising inflation rate.

This means that the purchasing power of these savings is eroded over time, leading to a situation where individuals may feel compelled to dip into their savings to maintain their standard of living.

The current economic landscape in the UK is undoubtedly challenging, with surging inflation and rising interest rates placing immense strain on households.

Addressing this issue requires a multifaceted approach that combines responsible fiscal policies, targeted support for vulnerable households, and initiatives to encourage economic growth.

By recognising the interconnected nature of these challenges, the UK can hopefully work towards achieving a more balanced and stable economic environment that safeguards the financial well-being of all its residents.

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From a sharp fall in inflation figures, to mortgage payments escalating, and how to avoid ticket scams – here are our favourite must know money stories this week to help you get your head around your personal finances. 

Inflation fever breaking, falls beyond expectations 

UK inflation fell to 7.9% in June, according to the Office for National Statistics (ONS), lower than forecasts of around 8.2% from earlier this week.  

A sharp drop in motor fuel prices was the primary reason for easing of inflation rate – taking some cost-of-living pressure off lower- and middle-income households. While transport costs fell significantly, other divisions such as food and beverage, restaurant and hotel, alcohol and tobacco, and clothing remain stubbornly high. 

Mortgage and credit holders might breathe a sigh of relief as the Bank of England’s base rate may not jump to as high as expected. However, this doesn’t mean that further hikes are not coming. Base rates are still expected to be hiked, and prices are still increasing, just at a slower pace. 

While it is a step towards the right direction, inflation is still nearly four times the Bank of England’s target rate – and we are yet to see the full impact of rate rises on consumers and the economy.  

Alice Haine, personal finance analyst at investment platform Bestinvest, said that the fall in inflation “will deliver some relief to households, with the bigger-than-expected decline offering hope that the long run of tearaway prices rises is finally over.” 

She added: “The improving inflation data is unlikely to prevent the Central Bank from pushing ahead with another interest rate rise when the Monetary Policy Committee meets next month – as high prices are still causing significant pain for households and businesses up and down the country. But at least the numbers are moving in the right direction with markets now expecting rates to peak below 6% in March next year.” 

Mortgage payments set to jump by £500 

The Bank of England said mortgage payments will rise by at least £500 a month for nearly one million households by the end of 2026, reports Tom Espiner for BBC News.  

According to the Bank’s Financial Stability Report, over two million households will pay between £200 and £499 more monthly by the end of 2026, and a further one million mortgage holders will see their monthly payments rise by at least £500. 

The Bank said mortgage holders “may struggle with repayments” on loans. as fixed-rate mortgage deals expire and renewed loans see mortgage repayments go up. It added that lenders are strong enough to withstand a rise in customers defaulting on repayments. 

The Bank has consecutively raised interest rates from 0.1% in December 2021 to 5%. In June, Chancellor Jeremy Hunt said that the Bank has “no alternative” but to raise rates. 

Households and firms alike have been under pressure as interest rates have risen in a bid to lower high inflation. Furthermore, expectations of borrowing costs rising has pushed up mortgage payments for the already-stretched UK households.   

How to avoid festival and gig ticket scams 

With many popular events selling out in double-quick time, all is not lost if you are not successful. However, it pays to be cautious when trying to bag a last-minute ticket, writes Suzanne Bearne for The Guardian. 

• Scour genuine resale sites: Check out websites that sell resale tickets, such as Ticketmaster, TicketSwap, or Twickets. Ticketing apps like Dice allow you to join waiting lists for sold-out gigs too.
• Too good to be true: Scammers are becoming increasingly savvy, and a spokesperson from an internet safety website added that “if it’s too good to be true, it probably is.”
• Check the person’s profile: Some of the obvious warning signs are found here. Few friends/followers, only recent posting activity, switched off comments, foreign location settings, excessive retweeting, or low engagement are some of the red flags to look out for.  
• Use ‘reverse image’: Scammers often scrape photos of tickets online. A reverse image search on google might be able to spot if the image is available elsewhere online. You can also apply the same approach with the seller’s profile pictures. 
• Pay by credit card: Most scamsters push buyers to pay via direct bank transfers. Credit cards provide fraud protection between £100 to £30,000, and if you can demonstrate that you have been defrauded, the amount should be refunded. 

In case you’re a victim of scam, take pictures and screenshots of your conversation, report and block the fraudsters accounts, and contact your bank to try and stop the transaction immediately. You can further report them to Action Fraud, the national fraud reporting centre. 

Photo credits: Pexels

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From wages rises fuelling inflation, to over-50 pandemic retirees being ‘much poorer’, and the upside of generation rent – here are our favourite must know money stories this week to help you get your head around your personal finances. 

Wage rises fuel inflation, as real pay falls behind 

Regular pay grew by 7.3% between March to May 2023, according to the Office for National Statistics (ONS) equalling the record growth rate set last month. But with inflation currently at 8.7%, real pay is still lagging in real terms. 

The increase has put further pressure on the Bank of England to continue hiking rates in its attempt to slow price increase and cool the economy. Concerns over strong wage growth remain as it feeds consumer demand and further forces companies to increase the prices of their products – a so-called wage price spiral.  

While a higher wage means you have more money to spend out of your pocket, it is certainly not keeping up with inflation either – regular pay fell by 0.8% overall, after accounting for inflationary impact. 

Sarah Coles, head of personal finance, Hargreaves Lansdown comments: “Somehow, pay is simultaneously too high for the Bank of England’s liking, and yet too low to keep up with inflation.” 

The Bank faces the challenge of carefully working around the tight labour market to end the vicious cycle of inflation and rate rises without hurting the incomes and employment of UK households.  

She added: “It’s likely to mean both that interest rate rises are on the cards, and that more interest rate rises could well exacerbate growing weakness in the jobs market.”  

The upside of generation rent 

Amid turmoil in the housing market, “renting is largely risk and responsibility-free, unlike owning a property,” writes Ben Wilkinson for in The Telegraph. 

While today’s tenants feel the squeeze of the sharp rent rises and competition in the property rental market, things are not quite rosy for landlords and homeowners alike.  

Many have stretched themselves to get on the ladder at the peak of the market – and are now facing punishing mortgage rises, the burden of monthly payments and commitment to decade long contracts, along with the threat of the housing market crashing down. 

On the other hand, renting is risk and responsibility free, according to Wilkinson. Renters have short-term contracts and no maintenance responsibilities – giving them the ability to move easily to access better opportunities in different locations.  

While renters are not immune from surging housing costs and there is a need for better regulation to root out unfair landlords – in the current situation with wobbling house prices, the heavily-mortgaged might wish they were renting.  

Over-50s pandemic retirees are ‘much poorer’ 

People over 50 who left work during the pandemic are “much poorer” in general than other retirees, reports Jemma Dempsey for BBC News. 

Research from the Institute for Fiscal Studies (IFS) shows that 48% of those who retired in 2020-21 were now living in relative poverty. The report found that they cut their food spending by £60 per week on average and nearly half of them had no access to either private or state pensions.  

Older workers between the ages of 50 and 70 who left in the first year of the pandemic were “not retiring in comfort”, the IFS said, compared with those who had retired even just a year earlier.

The study noted that older people who stop working often never re-enter the workforce. “This group may be experiencing long-term poverty and greater hardship in the current cost of living crisis,” it said. 

Chancellor Jeremy Hunt has made it a goal to encourage the over-50s back into the workplace.  

“We have recently committed £70m in back-to-work support for the over-50s including a new online Midlife MOT launched this week,” a spokesperson said. 

Photo Credits: Pexels

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From record savings withdrawals to the stubbornly high cost of petrol, and how to have a fun-packed summer for free – here are our favourite must know money stories this week to help you get your head around your personal finances. 

Record savings withdrawals in May 

Customers dipped into bank and savings accounts to withdraw record levels of cash this May due to the ongoing cost-of-living crisis, reports Kevin Peachey for BBC News.  

The Bank of England said £4.6bn more withdrawn than paid into bank and building society accounts – the highest level seen since comparable records began 26 years ago. 

The rising costs of living, including grocery bills, mortgage payments, and rent, is putting household finances under strain. There is also an added pressure on some households that have shifted into higher tax brackets recently.  

Richard Lane, director of external affairs at debt charity StepChange said: “Cost pressures are everywhere and eroding people’s financial headroom, leaving them more vulnerable to harmful borrowing and problem debt.” 

Banks have been accused of offering “measly” interest rates to savers, and failing to adequately pass on the Bank of England’s rate rises. Chancellor Jeremy Hunt has urged banks to provide fair rates and said that it was ”taking too long” to pass on increases in interest rates to savers. 

How to have a fun summer for free  

From enjoying music festivals, to food, to art, and nature for free, you don’t need to miss out if your money is tight, writes Harriet Meyer for The Guardian. Ideas include: 

• Volunteer at a festival: Organisers often rely on volunteers willing to put in a shift before or after the festival, in exchange for a free ticket. Some recruitment companies that provide staff for events and festivals are WaterAid, Oxfam, DC Site Services and Seed Staff. 
• Make use of social media: Use the events platform of social media such as Facebook to look for free activities around you. There’s a range from music to sport to craft and gardening. Sites including Eventbrite also allow you to filter by area or such preferences to suit your needs. 
• Join the audience (for free): If you’re a fan of a particular movie, or TV show, join the mailing list for BBC shows to receive alerts for any free tickets coming up. You can also check Applause store (for popular live shows), Standing Room Only (for current shows), or Chortle (for comedy shows).  
• Stay local: There’s events in most local areas including workshops, screenings and concerts. Local communities on social media, or local community centres, libraries, and universities often post notices for such free summer events.  
• Walking tours and hikes: Take advantage of the warm summer to explore your local parks, hiking trails, and beaches. There are tons you can do outdoors from picnic and birdwatching to outdoor yoga. ‘Meetup’ is a platform that’ll connect you with others with similar interests.   

Supermarkets using motorists as ‘cash cows’  

Supermarkets have been accused of using motorists as “cash cows” charging drivers 6p per litre more than necessary, reports Hannah Boland, Dominic Penna, and Matt Oliver for The Telegraph.  

This increase more than completely offsets a 5p cut to fuel duty introduced by the Treasury in 2022, costing taxpayers £2.4bn a year.  

Asda, Morrisons, Tesco and Sainsbury’s overcharged drivers by £900m in 2022 alone, according to the competition watchdog, the Competition and Markets Authority (CMA), in the latest salvo against grocers as they battle accusations of profiteering. 

The CMA blamed weaker competition between supermarkets for the higher prices.  However, supermarket chiefs claimed that the CMA failed to take into account rising costs of payroll and rents. 

Grant Shapps, the Energy Secretary, said: “Some fuel retailers have been using motorists as cash cows – they jacked up their prices when fuel costs rocketed but failed to pass on savings now costs have fallen.” 

The Government, already battling stubbornly high inflation, intends to force grocers to publish their prices online in an attempt to improve transparency and protect consumers. 

Photo Credits: Pexels

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Chancellor Jeremy Hunt sat down with big banks last week to hash out a new ‘mortgage charter’ deal to protect homeowners with loans from soaring rate hikes.

Hunt has pledged to take action on savings rates too, and it is now widely recognised that High Street banks simply aren’t passing on rates quickly enough.

While it would be easy for Mouthy Money to claim a victory of sorts after our vocal campaign on this issue, we don’t believe the solution has yet been found.

It is now essential that the Government either legislate or use other binding methods to coerce the savings sector into accepting that firms MUST pass on rates as soon as the changes feed through from the Bank of England, in the same way that already happens for mortgages and other debt product such as credit cards.

Setting a rule, for example, that prevents banks from increasing debt product rates unless they also increase their savings rates, would be a good start.

This must happen as soon as possible to protect the economy from the ravages of inflation.

At the core of this is rewarding savers for not spending their cash. While the mortgage market is large, not everyone has access to it. But everyone is a potential saver, given enough incentive from their savings interest rate on offer.

If, as a country, we truly want to tackle the bane of inflation then the Government must act now to stop savers from the raw deal they have been given for so long.

Instead of simply punishing debt holders, we must collectively reward those who wish to save for the long term. Not only will this help the battle against inflation, but it might also encourage a new generation of savers, which in and of itself could be the solution to some of the UK’s longest-term financial woes.

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