The cost-of-living squeeze may have eased slightly, but many households are still bracing themselves for a potential price hike. UK inflation dipped to 2.6% in the year to June 2026, according to new figures from the Office for National Statistics (ONS). This welcome drop – matching the rate seen in March 2025 – marks the lowest level since December 2024 and provides some much-needed relief after months of persistent price rises. However, industry experts warn that this respite may be short-lived, with a looming increase in energy costs threatening to reverse the trend.
Ofgem's decision to raise the energy price cap by 13% from July is expected to have a significant impact on consumer prices. With Brent crude prices reportedly climbing back above $90 a barrel, adding further upward pressure on costs, households are facing an uncertain future. For many families, this means making tough choices about how to balance their budgets – and it's not just the most vulnerable who will feel the pinch.
Nathan Emerson, Chief Executive of Propertymark, highlights that while the movement towards the Bank of England's 2% target is a positive step, household affordability remains a major concern. Both prospective buyers and renters continue to face significant challenges, with analysis suggesting that buying remains cheaper than renting in less than half of English and Welsh markets. This means many households will need to be cautious about their finances, carefully managing incomes against essential outgoings.
For those with mortgages or looking to enter the property market, the inflation data brings the Bank of England's monetary policy into sharper focus. Ben Thompson, Director of Home Moving Strategy at the Mortgage Advice Bureau, advises individuals to consider their options, particularly in light of subdued domestic economic performance. He suggests that securing a comfortable mortgage rate now could be a more prudent strategy than waiting for potential future improvements.
The government's new measures to ease the cost-of-living crisis may offer some immediate relief – but the long-term impact will depend on how they're funded. Increased borrowing, tax increases or spending cuts elsewhere might help to offset inflationary pressures, while alternative strategies like a VAT cut on electricity bills and a cap on most bus fares could provide some short-term respite.