Brits are facing a difficult Christmas after inflation jumped. Everything from the election of Donald Trump to the prospect of even higher bills makes it feel ‘like the walls are closing in’, one analyst said.
Between October 2023 and October 2024, inflation rose by 2.3%, up from the 1.7% figure in September, the Office for National Statistics said. This was largely spurred by the drastic 10% Ofgem price cap increase at the start of October.
Higher inflation means interest rates are likely to stay higher for longer. And there are concerns that previous expectations for multiple interest rate cuts by the Bank of England in the months ahead are now on the chopping block.
Now experts have explained what the new financial situation actually means for household budgets. And while some are worried, others are offering reassurance.
Alastair Douglas, CEO at TotallyMoney, said: “Since the autumn Budget, we’ve heard that unemployment, mortgage rates, and repossessions are creeping up. We’re now waiting to be told that energy bills will increase again in January, while retailers are warning that tax hikes will further drive inflation and job losses.
“Following five turbulent years, people need stability and hope, but they say bad luck comes in threes. Could the news of tariffs on UK exports to the US be just that, following the global pandemic and cost of living crisis?”
Many analysts believe the rising inflation rate is likely to stick around into the new year. But in a hopeful sign, some were also keen to highlight that Brits have endured far worse in recent times – including an 11.1% peak inflation figure in 2022.
An upbeat Isaac Stell, Investment Manager at Wealth Club, said: “With inflation close to target and one-offs causing the latest spike up, the Bank of England should feel confident about reducing rates by 0.25% in December, helping to ease the burden on consumers facing a rise in their heating bills as the winter weather begins to set in.”
Unfortunately, others do not share this view. Emma Jones, managing director at Whenthebanksaysno.co.uk, admitted the inflation figures were a problem. She said: “This is not the news anyone with a mortgage wanted to see. There’s every prospect lenders will now continue to hike rates and a base rate cut in December is almost certainly off the table.
“There was such optimism just a month or so ago and now it feels like the walls are closing in.” Chris Barry, director at Thomas Legal agreed, saying: “This is really bad news for borrowers and further rate cuts from lenders will not happen any time soon.”
On the opposite side, Paul Noble, CEO of Chetwood Bank, indicated it could be a good time for savers. He said: “There are strong opportunities in the savings market for those looking to make their money work harder over the festive period and into 2025.
“Nevertheless, [the latest] figures are also a timely reminder to the banking sector that banks must do everything they can to support consumers and help ease their worries over festive spending as we move towards one of the most expensive and financially testing times of the year.”