The Consumer Prices Index (CPI) rose by 3.8% in the 12 months to July, up from 3.6% in the 12 months to June and the highest recorded increase since January 2024. On a monthly basis, July saw a 0.1% increase, compared with a 0.2% fall in the same month last year.
The announcement was met with a mixed reaction from the property and finance sectors, with differing views on the impact on the housing market and the potential for a fourth rate cut this year.
‘Another rise in monthly inflation takes us one step closer to 4% – double the bank’s illusive target and where their long-term forecasts suggest inflation will peak’, said John Phillips, CEO of Just Mortgages and Spicerhaart.
“While you can say that inflation is currently playing out according to the bank’s plan, it still remains ultra sticky, highly unpredictable and totally susceptible to both internal and external economic shocks. It likely explains why the recent interest rate cut was such a knife-edge decision, and yet so necessary to give some form of support to a struggling economy.
“While that 5-4 verdict likely irked many investors and economists, we remain hopeful for at least one more base rate cut this year – although this is totally reliant on how inflation plays out and how much fight the UK economy has left in it.
“Positive movement all helps towards improving conditions in the mortgage market and enables it to be that key driver in economic growth. While inflation continues to add pressure to households – particularly when doing their weekly shop – we continue to post positive numbers when it comes to buyer registrations, valuation requests or mortgage appointments.”
Movera CEO Nick Hale thinks the rise in inflation makes a rate cut unlikely, but remains positive. ‘It’s not all doom and gloom for those looking to enter the housing market – or, indeed, for those on tracker mortgages’, he commented.
“Given the FCA’s recent decision to negate the need for a full affordability assessment when reducing the term of a mortgage, we do still expect to see growth.
“But this may be short lived as the news today makes a further interest rate cut this year unlikely. As progress hangs in the balance, this is the ideal opportunity to refine processes and increase digitalisation. When the market picks up and volumes rise, resilience and capacity will be key.”
Ben Thompson, deputy CEO of the Mortgage Advice Bureau, said the news was expected but disappointing. ‘While borrowing costs have continued to ease, there remains this delicate balance between controlling inflation and ensuring economic growth’, he explained.
However, he said he isn’t ruling out another rate cut – and said homebuyers are still at an advantage:
“It’s actually a very good time to buy. The level of housing stock for sale is a lot higher than at any time in more recent years, and house prices have remained flat. With our research revealing that 61% of renters cited high property prices as the main barrier to homeownership, we need to debunk the idea that buying a home is out of reach.
“With the right information and guidance from a mortgage broker, home moves and the dream of homeownership is achievable – along with the significant financial opportunities that come with it.”
Propertymark CEO Nathan Emerson said consumers are right to be worried – and the government should remain focused on delivering its housing promises. ‘Unfortunately, any increase seen within the rate of inflation does brings very justified concerns to consumers, many of whom are still struggling with the cost of living, which has been steadily rising over the past few years’, he said.
“Although there is more work to be done to help ensure inflation tracks back down towards the Bank of England’s target of 2%, we have seen three base rate cuts across 2025, which have provided instant benefits to those on tracker mortgages and additional new competitive rates from many lenders.
“It remains important that the UK Government and devolved administrations keep a tight focus on the fact that housing plays a central role in providing consistency within the UK economy and that delivering a range of sustainable housing options brings both long-term stability and an opportunity for regional growth.”
