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Spiralling levels of inflation are making homeowners unhappy

According to the OECD, Britons are struggling under 148 percent household debt to income.

Homes in London. Image (C) Tim Sandle
Homes in London. Image (C) Tim Sandle

Oliver Rust, head of product at independent inflation data-aggregator Truflation, looks at the current U.K. inflation data. This follows on from following official figures released by the government’s Office of National Statistics (ONS) during June 2023.

While the official data body is showing U.K. inflation at 8.7 percent Truflation’s own live UK CPI index – compiled in real-time using millions of data points – shows UK inflation is in fact closer to 12 percent. Truflation’s index is compiled from millions of data points measured in real-time. This means it is typically more accurate than official figures.

Unlike the ONS, though, Truflation shows inflation beginning to fall in a number of key categories. One of these categories, however, includes house prices, driven by continued increases in interest rates this year. As mortgage costs continue to rise, this is putting U.K. homeowners in a precarious position.

Rust explains that the U.K. is showing a starkly different trend compared with nearby European Union member states: “The U.K. currently faces a unique set of circumstances that are reviving its image as the sick man of Europe. Unlike the U.S. and mainland Europe, the UK is battling exceptionally sticky inflation, forcing the Bank of England to wage a war that threatens to plunge the island nation into recession.”

In terms of where the U.K. is heading, Rust says: “On the plus side, we are registering a downward trajectory in several key sectors, including petrol prices, household items, apparel, and recreation and culture – though, of course, from a higher base than the official data suggests.”

The inflation rate has implications for those with mortgages, which Rust sees as: “In less welcome news for homeowners, we are also registering a downward movement in owned property costs, which reflects declining house prices.”

According to Truflation, annual price growth in the owned property category – which includes the price of homes as well as other costs – has fallen considerably since March, down from 108 percent to under 40 percent. This poses a unique threat to homeowners as interest rates and mortgage costs continue to rise.

This leads Rust to opine: “Britain is a nation of highly indebted homeowners thanks to over a decade of cheap borrowing costs. According to the OECD, Britons are struggling under 148 percent household debt to income, placing the UK among the top ten most indebted nations in Europe.”

Rust adds further to the implications: “Today, though, with the average two-year mortgage rate now sitting at around 6 percent, up from 5.3 percent at the beginning of May, homeowners are grappling with increased financial strain. This pressure is only set to intensify as the Bank of England is committed to fighting the war against inflation until the bitter end.”

Rust concludes: “U.K. homeowners are likely to face a very tough time over the coming months and would be wise to brace themselves for rising costs and falling prices.”

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Written By

Dr. Tim Sandle is Digital Journal's Editor-at-Large for science news. Tim specializes in science, technology, environmental, business, and health journalism. He is additionally a practising microbiologist; and an author. He is also interested in history, politics and current affairs.

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