Figures from the Office for National Statistics (ONS) showed that it was the first time since May that inflation has risen above the Bank of England’s 2% target.
It was the biggest monthly rise since records began in 1997, surprising analysts, who had predicted inflation of 2.6% for December.
The ONS said the increase was mainly due to the effects of falls in oil prices last year, VAT returning to 17.5% from 15%, less discounting from retailers in the run-up to Christmas and unchanged fuel prices compared to sharp falls a year earlier.
The Retail Price Index, which includes housing costs, rose to 2.4% from 0.3% in November and is now at its highest level since November 2008.
Howard Archer, chief UK economist at IHS Global Insight, said the figures were a shock to the Bank of England (BoE).
He said: “The data was worse than expected. I think the BoE thought inflation had peaked but this was not the case. The fact that there was no VAT cut last year and there were no discounts by retailers in 2009 meant inflation was bound to spike up.”
Andrew Montlake, director at the Coreco Group, added that the figures will end the rate complacency among borrowers over the past year.
He said: “If rates rise to contain inflation, variable- rate mortgage holders will find themselves with significantly higher monthly payments. Many borrowers who should be fixing are leaving it dangerously late.”
Nick Hopkinson, director of Property Portfolio Rescue, said the increase was worrying news for homeowners.
He added: “Quantitative easing was likely to fuel further inflation and interest rates may therefore have to increase earlier than forecast to keep inflation in check. Many struggling homeowners are living in fear of a mortgage interest time bomb which is now more likely to go off.”
