Cost of living - latest: Another UK interest rate hike now 'probable' as inflation not falling as much as expected (2023)

  • Inflation falls to 8.7%
  • The cost of living crisis is starting to recede, so why are economists not happy and what might happen next? | Ed Conway
  • Another rate hike now 'hard on the table'
  • New forecast when the 2% inflation target will be reached
  • The IMF sharply raises the outlook for the UK economy
  • Netflix's crackdown on password sharing begins in the UK
  • Your dilemmas:My employer has reduced my working hours during maternity leave, is this allowed?
  • We have a budget:Save for your children|Do food subscriptions save you money?|holiday pocket money|The best broadband deals


Your dilemmas: I'm paying off my father's mortgage, how do I formally sign up?


My father will be 76 in October: he has eight years left on his mortgage and his fixed-term contract ends in March. My husband and I both live with him. Our credit score isn't great, but we're paying off the mortgage as is. What are the odds he'll get a new term or we'll join?

Cost of Living Specialist Megan Baynes says:If you add someone to your mortgage, there are two ways to do this:

Joint Tenants: The parties involved usually own a certain percentage of the property (it doesn't have to be 50-50). If one of the parties dies, the house does not automatically pass to the other joint tenant.

Co-tenants: This is the most common option. Both parties would have equal rights to all property. Upon death, ownership passes to the second owner.

I suspect he wants to be a co-tenant, because then he has equal rights to the property.

You will be subject to the same standard checks as anyone applying for a mortgage based on your income and affordability.

You may also be charged stamp duty as you are technically considered to be buying part of the property and this involves legal changes to the title deeds.

If you decide to go this route, you should consult an attorney first. I would advise contacting someone who specializes in housing for an initial consultation; You will be able to talk about your exact circumstances and tell you what is possible.

Another option could be for the father to mortgage the property and then apply for a new joint mortgage; as a result, you apply for a new mortgage. In that case, if you are looking for the best deal, you should hire a mortgage broker to help you.

Bob Singh of Chess Mortgages told me, “It would certainly be possible as long as the income is sufficient. Lenders will check your credit file unless it's very recent."

Ultimately, he said, "good mortgage advice is key2 so before you do anything, check with someone you trust or somewhere with good reviews.


Five major banks may have broken the law by sharing information in online chat rooms

Five major banks have broken the law by sharing sensitive information about trading government bonds in online chat rooms, Britain's competition watchdog has preliminary ruled.

Citi, Deutsche Bank, HSBC, Morgan Stanley and RBC illegally exchanged information in one-on-one conversations in Bloomberg chat rooms, according to the Competition and Markets Authority (CMA).

The talks, which included the buying and selling of UK government bonds, were allegedly held by some traders between 2009 and 2013.

(Video) Cost of living crisis: inflation barely drops as Brexit fuels food price rise

"This may have deprived taxpayers, retiree savers and financial institutions of the benefits of full competition for these products, including minimizing borrowing costs," said Michael Grenfell, CMA's executive director of finance.

He added that Deutsche Bank and Citi admitted to being involved in the alleged talks involving them, but that HSBC, Morgan Stanley and RBC (Royal Bank of Canada) admitted no wrongdoing.

The CMA said its investigation was ongoing and that it could eventually impose fines if it found two or more banks engaged in anti-competitive activities.


Expense Calculator: See what prices have gone up or down

As we've been highlighting all morning, prices have increased by an average of 8.7% over the past 12 months, putting pressure on already strained household budgets.

But by how much did their individual spending increase? Use our calculator to see how much the food, clothing and entertainment you pay for are increasing.


The average house price has fallen by £3,000 since last month but has increased since last year

According to the Office for National Statistics (ONS), average UK house prices rose by 4.1% in the 12 months leading up to March.

A typical property now costs around £285,000 - £11,000 more than at the same time last year.

But the March figure is £8,000 lower than the last high in November and £3,000 lower than February.

Here is a nationwide breakdown of house prices and their rise since March 2022:

  • England - £304,000 - up 4.1%
  • Walia - 214 000 £ - do 4,8%
  • Scotland - £185,000 - 3% increase
  • Northern Ireland - £172,000 - up to 5%

Regular readers will remember earlier this week when Rightmove said home prices had risen over the past month. Their numbers are up to date while the official numbers released by the ONS are behind schedule.


Another rate hike now 'hard on the table'

(Video) UK prepares for recession amid rising interest rates

Our Ed Conway isn't the only one who thinks the current rate of inflation could trigger another rate hike.

Pantheon Macroeconomics said the drop from 10.1% to 8.7% was "too small".

Of course, interest rate hikes are one way the Bank of England curbs inflation because it means people have less money to spend and are encouraged to save, and when that happens prices tend to rise more slowly.

Pantheon Macroeconomics says: "A further hike in bank rates to 4.75% at the next MPC meeting on June 22, from 4.5%, is now firmly on the table."

Soaring food prices and rising inflation in the service sector will be a "worry" for the bank, the company said.

As for what will happen to inflation now, Pantheon Macroeconomics points to something to expect tomorrow…

“CPI inflation will continue to decline rapidly in the coming months. Tomorrow, Ofgem is likely to announce that the average household's annual energy bill will fall to around £2,050 in July, down 18% from its current level of £2,500.

"This causes a decrease in the share of energy in the nominal rate."


Read three minutes: The cost of living crisis is starting to recede, so why are economists not happy and what might happen next?

Ed Conway, economist and data editor

They sometimes call economics "dark science," and if you listen to economists, you'll understand why.

Inflation, the rate at which prices rise each year, has fallen below double-digit levels for the first time since last summer, from 10.1% in March to 8.7% in April.

Finally, the cost of living in crisis, or rather the rate at which the crisis deepens, is starting to slow down. So why are economists so gloomy today?

Coming back to the fact that there are two separate problems under this huge rate of inflation. And while the news from one is good, the news from the other is bad.

Let's get the good news first.

The main reason for the increase in the cost of living in recent years is the increase in energy prices.

They are reflected in our household bills and fuel costs, and to some extent everywhere. It was an unhappy period for many.

The good news is that some of that pressure is beginning to ease. While utility bills are still many times higher than they were a few years ago, the rate of increase is slowing (remember, inflation is an annual growth rate, not absolute levels).

The biggest spikes in energy bills happened more than a year ago, so the annual rate of energy price inflation doesn't seem so dramatic anymore.

And tomorrow there will be better news on that front when Ofgem announces the final level of the energy price cap that will set household bills later this summer.

It is expected to fall for the first time in years.

But something else is also happening here. Because when economists look at inflation, it's usually not higher fuel or food prices that affect it the most.

While they are painful for households, these prices are quite volatile from year to year. But remove these volatile elements of headline inflation and you get what is called "core inflation."

(Video) UK inflation falls less than expected

This is a better measure of the underlying direction of inflation. If core inflation is high, it means that headline inflation is more likely to remain high not just in the short term, but in the long term. And core inflation is currently high.

Instead of falling like the general rate in April, it even rose from 6.2% to 6.8%, the highest level in three decades.

This is a number that is of deep concern to economists, as it suggests that there is a possibility that inflation is embedded in the economy, that households and businesses are beginning to assume that prices will continue to rise for some time to come.

In other words, while today's reported number may sound like good news to most of us, and in some ways it is good news, the picture underlying today's numbers is quite the opposite. This suggests that inflation is more sticky, which is a bigger problem than previously thought.

As a result, the Bank of England will likely look at today's numbers and assume its work is not done yet.

Your task is to keep inflation as close to 2% as possible, and given today's numbers, that task seems much more difficult.

So there is a good chance the bank will raise interest rates again to 4.75% at its meeting next month. And then perhaps even more, which will only increase the pressure on many households.

As grim as it may seem, this cost of living crisis is far from over.


Asda will again offer £1 meals for children for half a term

To help with rising food prices, Asda has announced that it will keep the £1 Kids Eat café meal deal for the next six months.

Over the two Easter weeks, the supermarket served more than 115,000 meals.

"The deal stands out from other retailers because there are no hidden extras like minimum spend for an adult," said Asda.

The menu includes, among others: Penne pasta with meatballs and a vegan pasta dish with hidden vegetables. Children also receive a free piece of fruit with the purchase of the £1 hot meal deal.

As an alternative to a hot meal, Asda Cafés also offers a choice of cold and mixed meals for £1, including a sandwich, a drink and a piece of fruit.


New forecast when inflation hits the 2% target.

While it is positive that inflation has fallen to 8.7%, it is still far from the Bank of England's target of 2% and as we said, the headline figure is not falling as fast as expected.

Referring to the problem of core inflation, which we described in our post at 7:42 am, Jake Finney, an economist at the PwC accounting firm, said: it increased from 6.6% to 6%..9%%.

"This is the highest interest rate since March 1992 and above the Bank of England forecast of 6.7% earlier this month."

(Video) UK Inflation Stays Much Stronger Than Expected

Following today's announcement and "continued inflationary pressure", he believes the Bank will miss its 2% target by the end of 2024.

"By then, consumer prices could have increased by as much as a fifth," he added.

Still, Finney predicts that inflation will continue to fall in the coming months, with another significant drop likely in July, when the energy price guarantee expires.

"At this point, large drops in wholesale gas prices will start to translate into lower energy prices for UK consumers," he said.


The fall in inflation will take time to manifest itself in supermarkets - US.

That's what Grant Fitzner, chief economist at the Office for National Statistics, said in interviews this morning.

"We're not in the double-digit area anymore," he told BBC Radio 4. "We've seen declines in bread, cereals, fish, milk, cheese, eggs, sugar, jam and honey, that's positive."


"Let's not forget that many supermarkets have standing contracts that can take six to 12 months to complete as these contracts expire, hopefully renegotiated to bring prices down.

"It's going to take some time for that to come down to retail prices."


Jeremy Hunt returns fire as Labor attacks the government

Chancellor Jeremy Hunt outlined his reaction to the inflation figures.

“The IMF said yesterday that we have taken strong action to fight inflation, but while it is good that it is now in the single digits, food prices are still rising too fast.

"So, in addition to helping families with around £3,000 of cost-of-living support this year and last year, we need to stick hard to the plan to reduce inflation."

We also received feedback from Shadow Chancellor Rachel Reeves, who said: "As bills rise, families will worry about food prices and the cost of other necessities will continue to rise.

"You'll wonder why this Tory government continues to refuse to adequately address the cost of living crisis and why it fails to introduce a proper tax on the windfall profits of oil and gas giants."

She said Labor's mission was to ensure the most sustainable growth possible in the G7 to improve the situation for families.

(Video) Bank of England is 'probably going to have to raise interest rates again'


Will UK cost of living go down? ›

The Office for Budget Responsibility is warning of a big drop in living standards over the next two years. Once inflation is taken into account, household disposable income is set to fall by 5.7% between 2022 and 2024. That is the largest two-year fall since records began in the mid-1950s.

What is the predicted UK inflation rate for 2023? ›

The core rate, which excludes food and energy, jumped to 6.8%, the highest since March 1992 and above well forecasts of 6.2%. The consumer price inflation rate in the United Kingdom eased to 10.1% year-on-year in March 2023, down from 10.4% in February but more than market expectations of 9.8%.

How does raising interest rates affect inflation UK? ›

In short, higher interest rates will work because they will mean that less money will be spent in the UK (than if interest rates had not changed). When overall spending in the economy falls, price rises slow down. And this brings down the UK's inflation rate.

Will inflation go down if interest rates rise? ›

Higher interest rates are generally a policy response to rising inflation. Conversely, when inflation is falling and economic growth slowing, central banks may lower interest rates to stimulate the economy.

Will cost of living go down in 2023 UK? ›

Global recovery from the coronavirus (COVID-19) pandemic is putting further pressure on prices. In the UK, the price of consumer goods and services rose at the fastest rate in four decades in the year to October 2022. The annual inflation rate fell to 7.8% in the 12 months to April 2023, down from 8.9% in March 2023.

Is it cheaper to live in the UK than the USA? ›

When it comes to grocery and food prices, the UK is the winner in terms of overall affordability. The average British household spends less on groceries per month compared to the average American household, and UK supermarkets tend to offer more own-brand products, which are generally cheaper but still of good quality.

What is the expected inflation in usa 2023? ›

The annual inflation rate in the US is expected to remain steady at 5% in April 2023, the lowest since May 2021, but still much above the 2.1% average reported from 2000 to 2020. On a monthly basis, the CPI is projected to increase by 0.4%, significantly higher than the 0.1% rise observed in March.

Why is UK inflation higher than Europe? ›

Britain has struggled more than other countries with the surging cost of food, a shortage of workers to fill jobs and its heavy reliance on natural gas to generate power and domestic heating, all of which adds to inflation pressure. Below is an explanation of Britain's high inflation problem.

What is the long term forecast for inflation in the UK? ›

We expect inflation to fall quite quickly, to around 5% by the end of this year and then meet our 2% target by late 2024.

What will UK interest rates be in 5 years? ›

With inflation now exceeding BoE forecasts in both March and April, economists and analysts alike are more convinced that we could see between 3 and 4 more rate hikes in the UK of 0.25%. This could mean UK interest rates could now hit 5.25% in 2023, which could have a significant impact for borrowers and mortgages.

What can I do with my savings during inflation UK? ›

Consider longer-term savings accounts

If you really want to maximise your savings interest and mitigate the impact of high inflation, it might be worth considering a long-term savings account such as a fixed rate bond.

What will happen to interest rates in 2023 UK? ›

It's expected to increase by 0.75% in 2023 and 2024, before rising by 1% in 2025. Overall, the BoE is more upbeat on its assessment of the UK economic outlook. Although it expects inflation to fall sharply this year, ending the fourth quarter at 5.1%, this is still above the 2% inflation target.

Will inflation go down in 2023? ›

The current trend is certainly positive, and experts generally agree that inflation is headed to a more favorable place — at some point in the relatively near future. Ben Johnson, Chief Operating Officer of Kapitus, says, “We expect inflation to remain above the Fed's 2% target rate throughout 2023

How high will interest rates go in 2023? ›

With the next Federal Reserve meeting coming up on May 3, 2023, it's uncertain if the Fed will keep interest rates in a holding pattern through the spring. Both the Fed and experts are predicting another 0.25% rate hike for May.

What is the interest rate prediction for 2024? ›

These organizations predict that mortgage rates will decline through the first quarter of 2024. Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point.

How long will UK cost of living crisis last? ›

RHDI per person, a measure of living standards will not return to its 2021/22 level until 2027/28. And in that year living standards will still be below pre-pandemic levels in real terms, meaning that the effects of the cost of living crisis are likely to be felt for a long time.

Will food prices go down in 2023 UK? ›

Food retailers have said they expect prices to rise in 2023 overall but with the rate of inflation declining through the year and some products which have seen the sharpest rises falling in price.

Why is the UK in a cost of living crisis? ›

This is caused in part by a rise in inflation in the UK, as well as the economic impact of ongoing issues such as the COVID-19 pandemic, Russia's invasion of Ukraine, and Brexit. While all in the UK are affected by rising prices, it most substantially affects low-income persons.

Is it safer to live in the UK than in the US? ›

Is the UK safer than the USA? The UK has a lower overall crime rate than the US, but the US has a lower rate of certain types of crime, such as property crime. In terms of violent crime, the US has a higher rate than the UK.

Which country is better to live in UK or USA? ›

The UK has a more developed economy than the US, which means that it's easier to find a job there. Also, you'll have access to better salaries and benefits in general because there are more companies looking to hire foreigners with skills that they don't have themselves.

What is the cheapest way to move from USA to UK? ›

Ocean freight is the most economical route. However, if you need a speedy delivery, you may want to consider air freight on the higher side of cost. Moving from the US to England is the most common route to the UK. The major ports include Felixstowe, London, Liverpool, and Southampton.

Will grocery prices go down in 2023? ›

Food prices are projected to rise in 2023, albeit at a slower pace than they did in 2022, according to the USDA.

What is the highest inflation rate in US history? ›

The two highest year-over-year rates of inflation in U.S. history were in 1778 and 1917. In 1778, three years into the American Revolutionary War, the Continental Congress was printing money to fund the war, which increased the money supply, leading to inflation. Inflation peaked at nearly 30% in 1778.

Is inflation slowing down in the US? ›

Meanwhile, inflation across various metrics has been coming down, with the personal consumption expenditures (PCE) price index falling to 5 percent and the “core” CPI, which removes energy and food prices, dropping to 5.6 percent from a recent high of 6.6 percent last September.

Is the UK becoming too expensive to live? ›

The cost of living increased sharply across the UK during 2021 and 2022. The annual rate of inflation reached 11.1% in October 2022, a 41-year high, before easing in subsequent months. It was 10.1% in March 2023, the seventh successive month of double-digit inflation.

Why is UK cost of living so high? ›

Many of the reasons are the same - increased energy costs, shortages of goods and materials and the fallout from Covid. The annual inflation rate for countries which use the euro is estimated to be 6.9% for March, down from 8.5% in February. Inflation has been falling in the US too.

Why is the UK becoming so expensive? ›

Shortage of supply – low numbers of new houses built. Rising number of population. UK population rising, plus number of households increasing due to social factors, such as more people living alone.


1. Interest rates hit 14 year high - will it help UK economic crisis?
(Channel 4 News)
2. UK Inflation: Pressure on consumers eases while chances of a 'stickier' inflation rises
(Sky News)
3. UK economy crippled by inflation - are high prices here to stay?
(Channel 4 News)
4. UK interest rates hiked to 4.25% after surprise inflation rise
(Channel 4 News)
5. How interest rate hike will affect mortgages
(Channel 4 News)
6. State of the UK real estate market: Bloomberg UK Show
(Bloomberg Television)


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