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UK inflation falls to lowest level since 2021

The latest ONS figures have revealed that UK inflation has fallen to 3.2%, but what does this mean for UK families and will this equal more money in your pockets?

A photo of Dom Limberg, the author

By Dom Limberg

Published on: 17 April 2024

4 min read

UK inflation falls to lowest level since 2021

Inflation rates in the UK have been extremely high over the last few years, leading to a significant cost of living crisis. Millions of parents and families have sadly struggled with higher costs for essential items and bills like food, water, clothing, and electricity.

Based on the latest figures from the Office for National Statistics (ONS), UK inflation rates have fallen to the lowest levels since September 2021. With a new rate of 3.2%, our MPO financial experts are looking at how this will impact UK consumers moving forward.

Lower inflation should ideally equal slower increases in prices for goods and services, which we hope will provide more confidence for families during this cost of living crisis. There is also the potential for lower inflation to lead to a decrease in mortgage rates, which could help to ease financial pressure for thousands of UK homeowners.

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60-Second Summary – UK inflation falls to lowest level since 2021

TheUK’s inflation rate in April 2024 is 3.2%, which is the lowest inflation rate that we have seen since September 2021. The main question here is what does this mean for UK families, and will this equal more money in your pockets?

Our MPO financial experts have broken down the latest ONS figures and explained what the new inflation rate could mean for you and your family.

  • The ONS has attributed the lower rate to slower increases in food and drink costs, as well as a fall in bakery product prices.
  • Economists had predicted a larger fall in inflation in March 2024 (to 3.1%). It is believed that inflation could drop below the government’s ideal rate of 2% in April, due to the new lower Ofgem energy price cap being introduced.
  • Positive changes could happen within the mortgage market, as lower inflation makes it more likely for the Bank of England to reduce its base interest rate. Lenders may then drop their standard variable rates or decide to introduce new low-interest fixed-rate deals.
  • While lower inflation is good news, it doesn’t mean that prices for every product and service will drop immediately. Families who are still struggling with high costs can reach out to support services like Citizen’s Advice or apply for government support via the website.

As of March 2024, the rate of inflation in the UK is 3.2% which is a 0.2% reduction from the rate recorded in February (3.4%). The rate of inflation in the UK has not been this low since it measured as 3.1% back in September 2021.

Economists had hoped that the fall in rates would be larger than this (a drop to 3.1%), but it is still good news that inflation is continuing to fall.

BREAKING: Inflation falls to lowest level in three years

As stated in this breaking news report from Sky News, most people are now waiting to see what the inflation rate will be following April 2024. With a new Ofgem energy price cap being introduced this month, this should cause an even more significant drop in inflation.

The government has been aiming for 2% inflation and while we aren’t there yet, inflation is definitely moving in the right direction.

UK inflation rates are coming down, following two years of high rates with a peak rate of 11.1% in October 2022. The ONS has said that the biggest reasons for the drop in inflation rates are:

  • Slower increases in the cost of food and drinks
  • A fall in the price of bakery products (e.g. biscuits and crumpets)
  • Core inflation’ dropped from 4.5% to 4.2% in March (the figure that excludes energy, food, alcohol, and tobacco)
  • Services inflation dropped to 6% from 6.1%
A graph showing the latest inflation and interest rate figures from the Office for National Statistics

The chart above shows the official figures from the ONS which reveal just how much inflation and interest rates have changed in the UK over the past two years.

As inflation has steadily fallen throughout 2023/24, this has allowed the Bank of England to hold the current base interest rate at 5.25%. Many economists are now predicting that a potential decrease in interest rates could be possible later this year if inflation continues to fall.

It can be hard to picture how inflation rates would impact your home and family, but inflation affects the cost of pretty much every product or service in the UK. Most of us will have noticed climbing prices in our local supermarkets for example, as well as inflation feeding into higher mortgage rates.

A drop in inflation doesn’t mean that everything will suddenly get cheaper, but it does mean that prices aren’t rising as quickly. This can help to ease some financial pressure, as prices for essential items like food and clothing should remain steadier for now.

For any families that are still struggling with high costs, organisations like Citizen’s Advice can provide free support and guidance. You can even contact a debt adviser through Citizen’s Advice’s online web chat who can offer free and impartial advice.

Citizen’s Advice – Get help if you’re struggling to pay your bills: CLICK HERE

Lower inflation is good news for UK homeowners too, as it was high inflation that was driving mortgage rates up. If inflation continues to fall, lenders will be more likely to reduce their standard variable rates (SVR), which can make variable rate mortgages more affordable.

It’s possible that more low-interest fixed rate deals could become available later this year too, if no major economic changes happen before then. This would be brilliant news for any first-time buyers or those looking to remortgage from a higher rate, as you could save potentially £1000’s per year.

Household electricity and gas bills are also expected to drop in April, as Ofgem’s new £1,690 price cap is the lowest cap in two years. With winter being milder than expected and gas prices falling, the new price cap is a drop of 12.3% (£238) from the previous cap of £1,928.

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