Inflation drops to 9.9% while average house price rises by 15.5% — industry reacts

Meanwhile, the Consumer Prices Index including owner occupiers’ housing costs (CPIH) fell to 8.6%, compared to 8.8% in July.

A fall in the price of motor fuels made the largest downward contribution to the change in both the CPIH and CPI annual inflation rates between July and August.

However, this was partly offset by rising food prices, which made the largest upward contribution to the change in rates.

The ONS has also published the latest House Price Index, which revealed that the UK average house price rose by 15.5% over the year to July 2022 — the highest inflation rate the UK has seen since May 2003.

The average UK house price was £292,000 in July — £6,000 more than the previous month, and £39,000 higher than this time last year.

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

5:00pm

Nicky Stevenson, managing director at Fine & Country:
  
“Just when you thought a slowdown was coming, the housing market accelerates back into overdrive.
  
“The rapid cooldown in prices predicted by many economists has simply failed to materialise. 
  
“In fact, quite the opposite appears to be happening, and what’s increasingly clear is that the housing market and the broader economy do not always move in sync.

"With tax cuts expected in the coming days, many experts may find themselves urgently revising their forecasts for the remainder of 2022.”

Hans Christian Zappel, co-founder and CEO of  IMMO: 

"This unabated growth in house prices, combined with affordability challenges and spiralling debt prices, means the average household is having to reconsider its house purchase decision for the coming months.

"House price growth reflects and affects consumer confidence; successive interest rate rises and talk of a recession are expected to slow down demand for buying properties in winter months, as in summer tends to be the peak in terms of pricing.

"Even with unaffordable house prices, we all need a place to live, so we expect demand will shift from buying to renting, which offers more flexibility.

"Unfortunately, the shortage of good quality supply of rental properties doesn't help the situation; there's an urgent need for the government to look at controlling debt prices and consumer affordability, while at the same time for professional landlords to start offering safe, affordable and quality rentals for the UK market."

12:00

Simon Webb, managing director at LiveMore: 

“Rather unexpectedly, CPI inflation fell in August to 9.9% — now that the energy price cap has been reduced by the new government to £2,500 from October, inflation is expected to be dampened to some extent. 

“However, this is almost twice as high as this time last year when the energy price cap was set at £1,277, so many people are still experiencing significant increases in their cost of living.

“It is inevitable that the Bank of England will raise base rate next week, the question is by how much? 

“Whatever the increase, let’s hope it’s sufficient to help contain inflation and avoid tipping the base rate environment into territory not seen for 14 years.”

Mark Harris, chief executive at SPF Private Clients: 

“The surprise slight dip in inflation to 9.9% is encouraging, although it remains well above the Bank of England’s 2% target and further interest rate rises are still on the cards.

“Lenders are pulling rates to maintain service levels as much as to reprice upwards, while there is growing concern around affordability and borrowing potential. 

“Advice is more important than ever, particularly if borrowers have more complex mortgage requirements.”

Douglas Grant, CEO at Manx Financial Group:

“Today’s inflation announcement yet again signals just how difficult the remaining part of this year is going to be. 

“We believe that demand for working capital, which has already reached unprecedented levels, will soar even further, as more businesses desperately require liquidity provisions to counteract rising interest rates, supply chain issues, increases in wages and additional pandemic-induced headwinds.

“SMEs continue to struggle with accessing finance and, worryingly, this lack of availability is costing them and the UK economy in terms of growth at a time when it is needed the most.

“Last month’s announcement of the extension of Recovery Loan Scheme was very good news for UK businesses, but more needs to be done; 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 ways to power the economy’s resurgence, the importance of a permanent scheme cannot be understated — it could act as the fundamental difference between make or break for many companies and, in turn, our economy.”

Gareth Lewis, commercial director at MT Finance:

“House prices tend to rise where there is demand combined with lack of stock and these figures illustrate that.

“What we are seeing now are those pressure points of rising interest rates and the cost of living which haven’t yet been factored into transactional flow — purchases which completed in July would have been agreed in April, when many would have been blissfully unaware as to what was to come.

“This price growth is unsustainable because of the impact of affordability and what buyers are willing to pay for a mortgage. 

“This, in turn, will have a dampening effect on values, which could be the tipping point for the market.”