Inflation experienced by homeowners with a mortgage in 2023

The purpose of the UK Household Costs Indices (HCIs) is to estimate inflation rates experienced by different UK household consumer groups. The Household Costs Indices include owner-occupiers' Housing Costs (CPIH) and the Consumer Prices Index (CPI). These indices help demonstrate how the prices of goods and services consumed by various household subgroups change over time. They also provide valuable insight into the inflationary experiences of different population segments.

The Office for National Statistics collates the data and December 2023 insights per housing group are:

Mortgagor owner-occupier households witnessed the highest annual inflation rate in December 2023, reaching 6.3 percent. This surge is largely ascribed to the escalation in mortgage interest payments. It reflects the influence of changes in interest rates or other factors impacting mortgage expenses.

Inflation experienced by homeowners with no mortgage in 2023

Unlike mortgagor owner-occupiers, outright owner-occupiers experienced an inflation rate lower than the rate for private renters. Their inflation rate stood at 4 percent up to December 2023. This shows that outright owners may have faced fewer cost pressures than those with mortgages.

Inflation experienced by private sector renters in 2023

In the year ending December 2023, private renters experienced an inflation rate of 4.9 percent, indicating moderate inflationary pressure on housing costs for this demographic.

Inflation experienced by social sector renters in 2023

Social and other renters experienced a comparable inflation rate of 4.8 percent during the same period. However, it must be mentioned that social renters faced a more substantial contribution from food and non-alcoholic beverages, which partially offset a greater downward contribution from the decrease in gas and electricity prices. It is, therefore, clear that various cost factors influenced inflation rates for social renters compared to other groups.

The factors that drive house cost inflation rates (Household Costs Indices government data UK)

The factors influencing the inflation rates in the HCI for different tenure groups also impacted other subgroups. Subgroups that allocated a larger portion of their spending to mortgage interest payments or items that represented a smaller share, like electricity, gas, and other fuels experiencing price declines, experienced higher annual inflation rates in the last three months.

Conversely, subgroups with lower inflation rates were more affected by contributions from food and non-alcoholic beverages, recreation, and culture. However, these effects were balanced by decreased prices for electricity, gas, and other fuels. Higher inflation rates were noticed among higher-income households, non-retired households, and households with children.

Summary statistics UK Household Costs Indices per housing consumer group

• Mortgagor owner-occupier households 6.3 percent
• Outright owner-occupiers 4 per cent
• Private renters 4.9 percent
• Social and other renters 4.8 percent

Mortgagor owner-occupier households experienced the highest annual inflation rate, reaching 6.3 percent. This increase was mainly because of rising mortgage interest payments, reflecting changes in interest rates or other factors affecting mortgage costs.

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