Inflation Falls to 2.8% in April 2026: What It Means for Interest Rates and Mortgages
Inflation fell to 2.8% in April 2026, down from 3.3% in March, bringing it closer to the Bank of England’s 2% target. While this is a positive sign for the wider economy, the picture remains mixed, with some household costs easing while others continue to rise.
Lower energy prices helped bring inflation down, particularly falling electricity and gas costs. However, sharp increases in petrol and diesel prices meant transport remained one of the biggest pressures on household spending.
Key points at a glance
- The Consumer Prices Index (CPI) fell to 2.8% in the 12 months to April 2026, down from 3.3% in March.
- Monthly CPI rose by 0.7% in April 2026, compared with 1.2% in April 2025.
- Falling electricity and gas prices were the biggest reason inflation slowed.
- Petrol and diesel prices increased sharply during the month.
- Food inflation eased to 3.0%, down from 3.7% in March.
- Core CPI fell to 2.5%, its lowest level since July 2021.
- Transport remained the largest contributor to CPI inflation overall.
What’s driving the numbers
Inflation slowed in April because some of the largest household costs increased at a slower pace than they did a year ago.
Energy prices helped reduce inflation significantly, while food prices also became more stable. However, rising fuel costs, communication prices, and restaurant costs continued to add pressure.
Housing and household services
Housing and household services made the biggest downward contribution to inflation in April.
Within CPI, this category rose by 1.4% over the year to April 2026, compared with 5.3% in March. Much of this improvement came from lower electricity and gas prices.
Electricity prices fell by 8.4% in April compared with a rise last year, while gas prices dropped by 4.4%.
The changes were largely linked to the latest Ofgem energy price cap adjustment and government measures designed to lower household energy bills. The average annual energy bill for a household paying by direct debit for dual fuel was estimated at £1,641, around £117 lower than before.
Water and sewerage costs still increased, but at a slower pace than last year, helping ease overall inflation further.
While housing costs remain high overall, this was one of the clearest signs so far that price pressures are beginning to soften.
Transport
Transport continued to be one of the biggest contributors to inflation, despite the annual rate easing slightly from 4.7% to 4.5%.
The main issue was motor fuel prices.
Petrol prices rose by 16.6 pence per litre between March and April 2026, compared with a fall during the same period last year. Average petrol prices reached 156.8 pence per litre, the highest level since late 2022.
Diesel prices increased even more sharply, rising by 31.3 pence per litre month-on-month. The average price reached 190.0 pence per litre.
Overall, motor fuel prices increased by 23.0% over the year to April 2026, the largest annual increase since September 2022.
There were some offsets within transport.
Air fares fell by 3.3% in April compared with a large increase last year. This was partly because Easter fell earlier in 2026, reducing holiday travel demand during the inflation measurement period.
Vehicle Excise Duty also had less impact than it did last year, helping soften the overall transport figures slightly.
Food and drink
Food inflation eased again in April, offering some relief for household budgets.
Food and non-alcoholic beverage prices rose by 3.0% in the year to April 2026, down from 3.7% in March.
Prices were largely unchanged month-on-month, compared with a 0.7% increase at the same time last year.
Several categories helped reduce food inflation, including:
- Meat
- Chocolate and confectionery
- Oils and fats
- Tea and coffee
- Soft drinks
However, some areas still saw price increases, particularly:
- Vegetables
- Milk, cheese and eggs
While food prices are still higher than a year ago, the pace of increases is continuing to slow compared with previous months.
Clothing and footwear
Clothing and footwear prices returned to growth after falling in March.
Prices rose by 0.7% in the year to April 2026, compared with a fall of 0.8% the previous month.
Much of this increase came from clothing for men, women and children, alongside footwear prices rising after widespread discounting last year.
The figures suggest retailers may have reduced promotional pricing compared with spring 2025.
Restaurants and hotels
Restaurants and hotels continued to add upward pressure to inflation.
Prices in this category rose by 4.4% in the year to April 2026, up from 4.0% in March.
Monthly prices increased by 1.0% during April, showing that hospitality costs remain elevated despite wider inflation easing.
Core inflation
Core inflation removes more volatile items such as food, energy, alcohol and tobacco to give a clearer picture of underlying inflation trends.
Core CPI fell to 2.5% in April 2026, down from 3.1% in March.
This was the lowest level since July 2021 and will likely be viewed positively by policymakers.
Services inflation also fell sharply, dropping from 4.5% to 3.2%.
Although these figures suggest underlying inflation pressures are easing, they still remain above the Bank of England’s long-term target.
How CPI compares internationally
Inflation remains higher than some European countries, although the gap has narrowed.
In April 2026:
- CPI inflation was 2.8%
- Germany’s inflation rate was 2.9%
- France’s inflation rate was 2.5%
This was the first time since December 2024 that inflation fell below Germany’s level.
What this means for interest rates
With CPI now at 2.8%, attention will increasingly turn towards future Bank of England interest rate decisions.
The fall in both headline and core inflation will likely strengthen expectations that rates could reduce later in the year if inflation continues moving in the right direction.
However, policymakers will still be cautious.
Fuel prices remain volatile, transport inflation is high, and global uncertainty could still affect future inflation readings.
For now, interest rates may remain steady until there is more consistent evidence that inflation is fully under control.
What this means for you
If you are considering buying a property, remortgaging, or reviewing your finances, this latest inflation update could be encouraging.
Lower inflation may eventually lead to improved mortgage rates if the Bank of England begins cutting interest rates later this year. However, lenders will still be watching inflation closely before making major pricing changes.
At the same time, many households are still dealing with rising transport, fuel and service costs, meaning affordability remains important.
If your fixed mortgage deal is ending soon, reviewing your options early could help you secure a suitable rate before any future market changes.
At Kerr & Watson, you can receive clear and tailored mortgage and protection advice based on your individual circumstances. Whether you are buying your first home, moving property, or remortgaging, understanding how inflation affects borrowing costs can help you make more confident decisions.
Looking ahead
Several areas will continue to influence inflation over the coming months:
- Energy prices and future Ofgem price cap changes
- Fuel costs and global oil prices
- Food price stability
- Service sector inflation
- Future Bank of England interest rate decisions
While inflation is moving closer to target, it is still too early to say whether the path downward will continue smoothly.
Conclusion
CPI inflation fell to 2.8% in April 2026, driven mainly by lower electricity and gas prices alongside easing food inflation. This marks another step in the right direction and suggests price pressures across the economy are beginning to ease.
However, rising fuel prices and continued increases in service costs show that some financial pressures remain.
For homeowners and buyers, the latest figures may improve confidence that mortgage rates could gradually ease in the future, although affordability continues to be an important consideration.
By staying informed and planning ahead, you can put yourself in a stronger financial position regardless of how the market changes.
If you would like to discuss how inflation and interest rate changes could affect your mortgage or protection options, contact the team at Kerr & Watson today.
Read more: Consumer price inflation, April 2026
