High inflation has pushed the Bank of England to raise interest rates again. The Office for National Statistics (ONS) has revealed that the Consumer Prices Index (CPI) rose to 9.4% in the 12 months to June 2022, up from 9.1% in May*. Will this all reduce people's ability to afford a mortgage? How will this affect the wider housing market? Are we on the brink of an economic recession? Let’s explore…
It's halfway through the year, and your buying power has become less with the same amount of money. So, what to do?
Inflation, in a nutshell, means people's money is not going as far as it used to. To simplify, if the cost of a litre of milk was £1 and then rises by 5p, milk inflation is 5%. You may not notice these price rises month to month but they’re happening, and they contribute to the overall increase to the cost of living. In fact, right now, prices are rising so quickly that average pay is not keeping up. It was March 1992 when inflation reached 7.1%. 30 years later, uncomfortable parallels are emerging, and inflation has hit almost 10% and we're only half way through the year. We look at the reasons for these price hikes and how it will affect UK property and the money in your pocket…
Why are prices of products increasing in July 2022?
Prices are rising faster than they have done for 40 years. One of the main reasons for these price hikes is the rising price of energy. This has meant higher energy and transport bills for businesses, many passing on these extra costs to their customers. Another factor is the higher shipping costs which continue to hurt businesses and these costs are, again, passed to the customer. The cost of used cars has also increased, which is contributing to inflation. Staff shortages have been a particular problem as of late, due to Brexit and the fallout from the pandemic, and are prompting some employers to raise wages for their staff. This can contribute to inflation as businesses aim to cover increased labour costs.
Did house prices also increase in June?
According to Halifax, house prices in June 2022 were 13% higher than the same month just a year earlier. House prices increased again in June by 1.8%, which is the twelfth consecutive monthly rise. According to the latest house price index, property coming to market now costs £294,8451. It's really the supply-demand imbalance that continues to force house prices upwards. In some ways, this is good news for sellers and it might be an idea to check how much you could sell for, whilst house prices are so high.**