This is a fall from 3.4% in the year to December.
The ONS noted that the CPI including owner-occupiers’ housing costs (CPIH) increased by 3.2% in the 12 months to January 2026, which is down from 3.6% in the 12 months to December 2025.
The month-on-month CPIH dropped by 0.3% in January, whereas it saw little change in January 2025.
Positive news for mortgage borrowers
Prior to December, inflation had been on a downward trajectory, with 3.2% recorded in November. The latest data from January is an encouraging sign that the December figures may have been an anomaly.
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Moreover, the latest inflation figures are a positive indication that the Bank of England’s base rate may be cut at the Monetary Policy Committee’s (MPC’s) next meeting – which would be good news for mortgage rates. At the MPC’s last meeting in January, the MPC voted narrowly to hold the base rate at 3.75%.
John Phillips, CEO of Just Mortgages and Spicerhaart, said: “It’s positive to see inflation rebound from its seasonal blip and return to its downward trajectory. While still higher than the 2% target, inflation seems to be performing as the central bank expects. All eyes are now on next month’s MPC decision as the central bank responds to this news, as well as the recent rise in unemployment and sluggish economic growth. While opinion is still split on how far cuts will go this year, there is increasing optimism around a cut in March, which would be great news for borrowers.
“January provided a strong start to the year and that has continued into February, with robust buyer registrations and increasing demand for both valuations and mortgage appointments. Even with half-term disruptions, we’re looking at a really positive month as buyers get plans back on track – buoyed by high levels of product choice and continued innovation.”
He added: “As this momentum continues, brokers play a critical role in demonstrating to new and potential borrowers what the market has to offer, leveraging their deep knowledge and partnerships with a broad range of lenders to help clients achieve their ambitions.”
David Hollingworth, associate director at L&C Mortgages, said: “The rate of inflation was widely expected to take a sharp fall in January, after the larger-than-anticipated rise in December. This will further the hope that inflation is now on the downward path, to take it closer to the Bank of England’s target.
“It will do nothing to derail the chance of another base rate cut to come as soon as next month, especially after the rate of unemployment rose again yesterday. The tight 5:4 vote to hold base rate this month, with the minority preferring a cut, has also strengthened the market’s belief that base rate will be cut further.
“That should bring good news for mortgage borrowers. With another two cuts to base rate now looking more likely, there should be favourable market movement to help mortgage lenders improve their rates.”
Hollingworth added: “Fixed rates had been edging higher in recent weeks, but we’ve seen those rises steady and some lenders cutting rates back, as sentiment around the rate outlook has improved. Today’s news should help firm that up and if lender funding costs continue to ease, we could see more cuts to unwind some of the recent hikes.”
