FINANCE
(or switching supermarkets), making the most of special offers and cooking more from scratch, and do your best to keep utility bills down by monitoring usage and changing provider if necessary. If your savings are not paying at least the current rate of inflation then in real terms you are actually losing money, so always be proactive, grabbing introductory offers when you can and being prepared to switch regularly. Fill you ISA, and consider (if you’re not ready to buy) whether you should lock money away in a top-paying fixed-rate account. There are savings products out there that still beat inflation – at the time of writing, best buys included 4.75% at Atom Bank (limited withdrawals), 4.56% at Chip (unlimited withdrawals, includes a one-year bonus) and 4.47% at Cynergy Bank, fixed for six months with no withdrawals. For those nearly ready to buy, high inflation may have put a dampener on hopes for a rapid fall in mortgage interest rates, but that doesn’t mean putting your plans on hold. David Hollingworth, Associate Director at L&C Mortgages, recommends focusing on getting the best available rate. “Mortgage rates have been harder to call in recent weeks. Overall, it looks as though fixed rates may bobble up and down without any significant trend or shift either way. Borrowers would be better to focus on getting the best available rates and keeping under review, rather than second-guessing the next move in interest rates.”
won’t come as much of a surprise to learn that the inflation rate on food is much higher than CPI, reaching 4.4% in May – and chocolate increased by a terrifying 17.7%! The CPI does not include housing costs such as rents or mortgages, but these are monitored and included in a figure called CPIH.
WHY HAS INFLATION JUMPED?
There are many things that can affect inflation – the chocolate crisis, for example, is all down to bad weather in Ghana and Ivory Coast, which produce over half the world’s cocoa. In October 2022, when inflation jumped to a 41-year high of 11.1%, it was blamed on soaring energy prices caused by the war in Ukraine and Liz Truss’s mini-budget that gave tax cuts to higher earners, encouraging spending. Budget changes have had a role to play in the recent surge. Kris Hamer, Director of Insight at the British Retail Consortium, explains, “Headline inflation accelerated in April as additional costs from rising National Living Wage and Employers’ NI costs filtered through to prices faced by consumers, as well as rising costs of utilities (energy, water and broadband). Rising inflation was inevitable following the wave of additional costs hitting employers, and particularly retailers who employ over three million people across the country. For months retailers have been warning that rising costs would lead to higher price.” WHAT ACTION CAN I TAKE? Inflation affects some people more than others as it depends how you spend your money (you can find out your personal rate of inflation at ONS¹), but some costs are
EXPERT COMMENT
The sticky in ation gures being forecast would re ect what most of us already know: bills are taking a bigger toll and eyebrows are still being raised at the tills in supermarkets across the country. However, because these price rises were already forecast by the Bank of England, it would be unlikely to have a signi cant impact on interest rate expectations. These have moved, after weakening labour market data was released, so the market now expects two more cuts this year. This is likely to be the key factor in the savings and mortgage market in the short term. For savers, it could put downwards pressure on xed rate deals. Shorter xed deals have already fallen as a result of the May rate cut, but longer xes could come under pressure too. If you’re planning to x for three to ve years you might want to act sooner rather than later. It will remain important to choose the right combination of easy access and xed rates to suit your needs – and shop around among online banks and savings platforms for the best deals available at the time. The way the mortgage market is moving around at the moment means acting fast and taking advantage of opportunities will be key when you’re looking for a deal.
¹ ons.gov.uk/visualisations/dvc1833/calculator/index. html
common to everyone. Beat rising grocery bills by switching brands
Sarah Coles, Head of Personal Finance, Hargreaves Lansdown
First Time Buyer August/September 2025 127
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