Industry reacts to inflation rising to 10.4%

This is the first increase after three consecutive drops registered in November and December 2022, and January this year.

The CPI including owner occupiers’ housing costs (CPIH) also rose to 9.2%, compared to 8.8% in January.

According to ONS data, the largest upward contributions to the monthly change in both the CPIH and CPI rates came from restaurants and cafes, food, and clothing.

These were partially offset by downward contributions from recreational and cultural goods and services, and motor fuels.

Meanwhile, the latest House Price Index (HPI) data — released in tandem with the inflation figures — showed that UK average house prices rose by 6.3% in the year to January 2023.

Average house prices came in at £290,000 in January, marking a slight decrease from the previous month’s figure.

Industry experts react to latest ONS inflation and HPI figures

This section will be constantly updated throughout the day — check regularly for more comments from industry experts

3:30pm

Simon Webb, managing director of capital markets and finance at LiveMore:

“The rise in inflation is disappointing and remains well above the Bank of England’s target with high growth in prices, especially in the essentials such as food and energy. The halt on the rise of the energy cap in April for a further three months is welcome, but it is only a temporary measure.”

“Markets still expect the Bank of England to raise interest rates in the short term by another 0.25 percentage points, although are split between whether that happens in March or May, with other global factors at play aside from the war in Ukraine.

“The emergence of a potential new banking crisis (the collapse last week of Silicon Valley Bank and Signature Bank in the US and Credit Suisse being rescued via a takeover from UBS) doesn’t bode well for the global banking system and adds a further dynamic for central banks to consider when making decisions around interest rates. The question is what impact do all of these factors have on inflation?”

Jamie Alexander, director at Southampton-based Alexander Southwell Mortgage Services:

"The property market is under real pressure and the stubborn inflation we have, remaining above 10%, won't help.

"Now all eyes are on whether the Bank of England reacts on Thursday and decides to raise interest rates yet again. This will affect borrowers on trackers and the wider property market if it subdues demand further.

"A lot is riding on this week's Bank of England rate decision as it will affect sentiment and mortgage rates, which drive the property market."

1pm

Tomer Aboody, director at MT Finance: 

"Annual house price growth is slowing, demonstrating less positivity in the market due to higher rates and affordability concerns created by the cost of living. We expect this slowdown to continue until rates stabilise. 

"The market may benefit from further stimulation, perhaps in the form of the reworking of stamp duty. Banks remain keen to lend and many buyers still want to make a move, so such an impetus may persuade them to take the plunge."

Mike Staton, director of Mansfield-based mortgage broker Staton Mortgages:

"The problem with the housing market at the moment is that buyers think it is 2008 and sellers think it is 2020; and both are wrong. This is not being helped by overzealous estate agents that still continually choose to over-value properties.

"The one thing that is needed to sort out this mess is for the government to step in and regulate the estate agent industry and make them answerable to the mis-selling techniques that many of them still practice. I've seen more realism in a Nicolas Cage movie than some property valuations being carried out."

 

11:00

Paul McGerrigan, CEO at Loan.co.uk: 

“Today’s rise in the rate of inflation sends grave warning signs that the worst may not be over, and makes it more likely than ever that another interest rate rise will hit borrowers tomorrow when the Bank of England’s Monetary Policy Committee convenes. 

“The Office of Budget Responsibility (OBR) has stated that the UK will avoid a technical recession this year and economists predict the UK’s inflation rate will hit the Bank of England’s 2% target by the end of the year — however, today’s news will cast some doubt on this outcome and increase chances the MPC will increase interest rates tomorrow.

“This will also be of huge concern to households, the average consumer is significantly worse off and hundreds of thousands of families are finding it extremely tough.”

Samuel Mather-Holgate, managing director at Mather & Murray Financial: 

"Any suggestions the Bank of England was going to take its foot off the gas after the banking shock is now for the birds. 

“Even though these figures aren’t unexpected, as food prices continue to jump due to the lag in energy costs filtering into commodities, the Bank of England still might impose a 0.5 percentage point rate hike on us."

Douglas Grant, Group CEO at Manx Financial Group:

“Having avoided a recession, the UK economy seemed to be reversing some of the negative data; however, this morning's shock rise in inflation showed that UK businesses will not be rejoicing as the stormy and turbulent economic environment is likely to withstand. 

“Indeed, with the global banking sector showing worrying signs over the last couple of weeks, there will be concerns over long term liquidity for businesses which have already experienced periods where demand for working capital hit record levels.

"While many SMEs prepared for the worst by locking their debt into fixed rate structures, it is now too late for other businesses which were not so forward thinking. Hence, more should be done at governmental level to help SMEs, the backbone of the UK economy. 

"For some time, we have been calling for a sector-focused permanent government-backed loan scheme which brings together both traditional and alternative lenders to guarantee the future of our SMEs. 

“As the government looks for other ways to keep powering the economy’s resurgence, the importance of a permanent scheme should not be understated, it could act as the fundamental difference between make or break for many companies, and in turn, the strength of our economy. We very much hope this is something that becomes a reality." 

Mark Harris, chief executive at SPF Private Clients:

“The shock uptick in inflation after three months of falls may ring alarm bells for the Bank of England and makes another increase in base rate this month more likely.

“Swap rates, which underpin the pricing of fixed-rate mortgages, have been falling again in recent weeks, and a number of high-profile lenders have reduced fixed rates accordingly.

“Borrowers may be tempted to wait for rates to fall further, but there is a danger that they might not and trying to predict interest rates can be a dangerous game as the volatility around inflation suggests. Seeking advice from a whole-of-market broker as to the options available is crucial.”