UK Inflation Hits 2.9%, Boosting Pressure on Mortgage Rates

UK inflation rose to 2.9% in July, surpassing the Bank of England's 2% target and increasing pressure on mortgage rates.

The Consumer Prices Index jumped from 2.6% in June, which was its lowest level since December 2024, according to the Office for National Statistics.

The increase was expected due to a 13% rise in Ofgem's energy price cap from July, with the Bank of England estimating that higher energy costs would add around 0.4 percentage points to inflation.

For mortgage borrowers, this adds uncertainty to an already complex interest rate outlook, as Bank Rate remains at 3.75% after the Monetary Policy Committee voted 6-3 to hold it in July.