August’s inflation rise has been driven largely by higher fuel prices and airfares. With household bills also expected to increase, borrowers due to remortgage may benefit from seeking advice early.

Headline inflation rose to 3.1% in August, up from 2.9% in July, according to the Office for National Statistics. This was largely due to rising oil and gas prices, along with rising airfares. However, fuel costs are the key cause, as petrol and diesel prices remain high. Inflation also jumped from 2.6% in June to 2.9% in July.

Also known as Consumer Price Index (CPI) inflation, headline inflation covers everyday items like food, transport and energy. It tracks changes in prices for a ‘basket’ of goods and services.

Inflation set to rise further

This latest increase hasn’t come as a surprise, but further price pressures could follow. The conflict in the Middle East is affecting inflation. A Bank of England spokesperson predicts inflation is likely to keep rising for the rest of this year. One financial spokesperson predicted that it could peak at around 4.2% in January.

However, there is some good news. Food prices have remained stable, staying at 1.3% in the 12 months to August – no change from July. Core inflation, which covers utility bills and accommodation costs, stayed at 2.6%, while services inflation (covering hospitality and education) stayed at 3.4%.

Resilient UK economy

Despite the pressures, one financial spokesperson said that the UK’s economy has been fairly resilient. However, rising oil prices are expected to have a greater impact on the economy in the future.

Households will face rising bills. The energy price cap is due to rise by around 4% in October, with a further increase in January.

If you’re worried about rising costs and you’re due to remortgage within the next year, we recommend you seek advice early. Speak to an experienced mortgage broker at least six months before your fixed-rate deal ends. If you can, clear off or reduce debt on credit cards and loans. Look at your household spending and cut back where you can. If you need advice, we’re here to help.