The Consumer Prices Index (CPI) measure of inflation rose by 9.9 per cent in the 12 months to August, according to the Office for National Statistics (ONS).
This is below the 10.2 per cent consensus and is the first fall in the figure since 2021.
The ‘surprise’ dip from the 10.1 per cent recorded in July comes off the back of fuel prices falling 14.3p per litre. Drivers saw a 6.8 per cent fall in fuel prices over the month which reduced fuel inflation from 43.7 per cent to 32.1 per cent.
Richard Pike, sales and marketing director at Phoebus Software, said although the cost of fuel was lowering, “everything else is becoming more expensive”.
Kitty Ussher, chief economist at the Institute of Directors, said the fall in the price of petrol and diesel was driven by international markets, meaning the central bank will still have localised costs to deal with.
She added: “In fact, the inflation rate for locally-produced products and services such as dairy and personal care items continued to rise in August; it is home-grown inflationary pressures such as these that are the main concern of the Bank of England.”
Lenders stepping in
Pike acknowledged the help offered by the government in the form of the Prime Minister’s energy support package, but said if businesses did not get the same support, then costs would eventually be passed onto consumers.
He said it was the responsibility of lenders to help borrowers manage their finances.
Pike added: “For borrowers, this is a time to take stock, as interest rates rise lenders will be forced into increasing mortgage rates. We have already seen the average rate pass four per cent, which will of course put more pressure on households.
“The figures on arrears from the Bank of England yesterday showed that the value of mortgages in arrears fell in the second quarter, which is something of a false positive. This quarterly data is now months out of date and interest rates and inflation have been increasing since the end of the period.”
He said: “With this in mind it is only inevitable that the figures we will see in December for Q3 will show a reversal of this trend.
“For lenders there are sure to be a number of vulnerable borrowers that are already starting to worry and will need to know where they can get the help they need, before things get too late. The onus of responsibility is with lenders now to ensure that vulnerable clients get that help.”
Green solutions
Ross Boyd, founder of Dashly.com, pointed to green home renovations as a way to manage rising costs, in particular increasing energy bills.
He urged lenders to find solutions to address this.
Boyd added: “Soaring energy bills are something the UK’s mortgage lenders have the chance to address head on. Lenders can be part of the solution to this unprecedented crisis and the issue of energy longer term.
“There is currently a significant energy efficiency deficit for 75 per cent of residential properties. Equally, there is significant borrowing capacity available for property owners. We therefore need to start embedding energy-efficiency measures into people’s mortgages where applicable.”
Boyd said it was in the interest of both homeowners as their bills will be cheaper, as well as lenders as energy-efficient homes would retain value and reduce the likelihood of borrowers defaulting.
He added: “Now is the time for the mortgage industry to go green in earnest rather than continue along the current path of largely token green products.”
Helen Dickinson, chief executive of the British Retail Consortium, said energy bills were still a major worry.
She added: “Inflation eased very slightly this month, but at 9.9 per cent, it remains a significant concern for households who continue to face a cost of living squeeze. Energy costs are still the biggest component of inflation, and while the latest announcement to limit the rise in the energy price cap is welcome, consumers still face higher bills in October
“Despite the substantial cost pressures bearing down on businesses and their supply chains, retailers are trying their best to support their customers. This includes expanding value ranges, implementing price locks on key goods, and raising pay for staff.”
