Key Points at a Glance:
- The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 4.1% in the 12 months to April 2025, up from 3.4% in March.
- The Consumer Prices Index (CPI) increased by 3.5% over the same period, rising from 2.6% in March.
- On a monthly basis, both CPIH and CPI rose by 1.2%, which is a notable jump compared to April last year.
- The biggest contributors to the increase were housing and household services, transport, and recreation and culture.
- Inflation is now above the Bank of England’s 2% target, raising questions about the timing of any future interest rate cuts.
What’s Pushing Prices Up
April saw a noticeable rise in inflation, reversing the recent trend of slow and steady declines.
Three areas stood out in driving prices higher:
Housing and Household Services:
This category saw the most significant increase, with prices rising 7.0% in the year to April. Much of this came from higher energy costs. Ofgem increased the energy price cap in April, meaning the average household now pays around £111 more annually for their electricity and gas bills. Water and sewerage bills also saw a record monthly rise of 26.1%.
Transport:
Transport costs increased by 3.3% year-on-year, with a sharp 3.8% rise in just one month. Airfares were a major factor, jumping 27.5% in April alone. This was mainly because the price measurement fell during the Easter holidays, when travel is typically more expensive. At the same time, vehicle excise duty increased, and electric vehicles are now included in the tax. This has added to overall transport inflation, even though fuel prices fell over the year.
Recreation and Culture:
Prices in this category rose by 3.1% annually, up from 2.4% in March. Again, the timing of the Easter break pushed up the cost of foreign holidays and cultural activities.
Where Prices Fell
Clothing and Footwear:
While many areas saw rising prices, clothing and footwear bucked the trend. Prices dropped by 0.4% compared to last year, with a notable 1.1% fall in April. Women’s and children’s clothing and footwear were heavily discounted, likely due to increased promotional activity around the Easter break.
Furniture and Household Goods:
This category also saw deflation, with prices falling by 0.5% year-on-year and 1.7% on the month. Lower demand and continued sales have contributed to this downward pressure.
Core Inflation and Services Costs Still Running Hot
Core inflation, which strips out energy, food, alcohol and tobacco, is often seen as a better guide to underlying price trends. In April, core CPIH rose to 4.5%, up from 4.2% in March. Services inflation is also proving sticky, with CPIH services rising by 5.8% year-on-year, compared to 5.4% previously. This points to ongoing price pressures in things like rent, insurance, and professional services.
Wage Growth and the Bigger Picture
One of the challenges facing policymakers is that wage growth remains strong. If people are earning more and spending more, that can keep inflation higher for longer. Even though energy and food price volatility may settle, the cost of services and labour could keep inflation above target unless there is a sustained slowdown.
Impact on Interest Rates
With inflation rising again and well above the 2% target, speculation about interest rate cuts is cooling. The Bank of England may choose to hold interest rates at their current level of 5.25% for longer than previously thought. While some had expected a possible rate cut this summer, these latest figures could push that decision back.
High interest rates make borrowing more expensive, which is aimed at slowing down spending and reducing inflation. However, for homeowners and those looking to buy or remortgage, it can make securing a good deal more challenging.
Political and Economic Context
These figures come at a sensitive time, especially in the run-up to a general election. Political parties will interpret the data differently:
- One party may point to strong inflation control as a sign that economic policy is working.
- Others will focus on how energy bills and food prices are still rising, adding to the ongoing cost of living pressures many people are facing.
The economic message remains mixed, and while inflation is no longer in double digits, we’re still far from the calm and stability many are hoping for.
Looking Ahead
The jump in April’s inflation figures is a reminder that the path to economic stability is not always smooth. While we’ve seen positive movement in recent months, energy price adjustments and seasonal factors like Easter have had a noticeable impact. Inflation in the services sector and strong wage growth are likely to keep inflation above target in the short term.
The next few months will be key in determining whether April’s rise was a one-off or the start of a new trend. The Bank of England will be watching closely, particularly ahead of their next interest rate meeting in the summer.
What This Means for You
If you’re a homeowner or planning to buy, changes in inflation and interest rates can affect everything from mortgage affordability to the timing of your next move. For those already on a fixed-rate mortgage, higher inflation might not impact your monthly payments right now, but it could influence the deals available when your current rate ends.
For those looking at protection and insurance, rising prices in services and transport could increase costs over time. Reviewing your financial protection regularly is essential to ensure you’re getting the best value and coverage.
We’re Here to Help at Kerr & Watson
At Kerr & Watson, we keep a close eye on the latest economic trends so we can give you practical, no-nonsense advice. Whether you’re wondering if now’s a good time to remortgage, thinking about buying, or just want to sense-check your financial protection plans, we’re here for a chat.
Get in Touch for Personalised Mortgage and Protection Advice
Every financial situation is different, and we take the time to understand yours. Reach out today to find out how the current economic environment might affect your next step and how we can help you navigate it confidently.
Data Source: Office for National Statistics (ONS) Read more: Consumer price inflation, April 2025
