Positive news has been given by the Office for National Statistics (ONS) when releasing the latest inflation rate figure. It confirms a drop in inflation to 2.8% in the year to April. This is lower than the anticipated 3% and the lowest rate recorded since the year to March in 2025.
What has caused the drop in inflation?
The notable fall in inflation was primarily caused by lower electricity and gas prices. From 1st April, the government’s energy bill support package reduced the cap on how much customers can be charged for gas and electricity units by £117 per year. This energy price cap fell by 7% compared with the previous cap.
Other factors that contributed to the drop in inflation were lower water and sewage bills. Water bills increased by 9% in the year to April but the price increases were considerably lower than the previous year, when they increased by 26.4%. Likewise, sewage bills increased by 5.8% in the year to April. The previous year, however, they rose by 25.9%.
Inflation eased for food and non-alcoholic drinks, particularly for chocolate and meat. A rise of 3% in the year to April was recorded compared with a 3.7% rise in the year to March. Lower vehicle tax and costs for package holidays compared with figures for the previous year also helped drive the rate of inflation down.
All of these helped to offset the increases in inflation, which were largely due to motor fuel prices.
An increase in motor fuel prices
Motor fuel prices have seen the biggest increase since September 2022. They rose by 23% in the year to April compared with an increase of 4.9% in the year to March. The average price of a litre of petrol between March and April has increased by 16.6p. It has now reached 156.8p, which is the highest since November 2022. The average price of diesel rose by 31.3p per litre to 190p, which is the highest level since July 2022.
How will interest rates be affected?
The Bank of England’s (BoE) target for the inflation rate is 2% and the latest figure is on the right track to reach it. However, the full impact of the conflict in the Middle East is yet to be known, with higher costs potentially taking months to filter through. These are expected to cause inflation to rise again. As well as that, the energy bill price cap will go up again in July, also placing upward pressure on inflation.
The next review of the base rate is to be held on 18th June. Currently at 3.75%, experts believe that it’s unlikely the Monetary Policy Committee (MPC) will vote to reduce interest rates despite the current drop in inflation.
The impact on mortgage rates
In May 2026, major mortgage lenders cut their fixed residential mortgage rates. Experts are warning, however, that these cuts may slow or even be reversed as a result of the increased inflationary pressure.
Therefore, it’s recommended to lock in a new rate now if your deal is coming to an end within the next 6 months. This will protect you against any mortgage rate increases that may occur in the future. You can continue to review it before your existing deal ends in case a better rate becomes available in the meantime.
Even if the new rate is higher than the one you’re paying now, it’s still likely to be cheaper than your lender’s standard variable rate (SVR). This is the rate that your deal will automatically switch to if you haven’t secured a new deal before your current one ends.
Discover the options available to you
Whatever your situation, our mortgage brokers are here to find the most suitable deal for you. Give us a call on 01322 907 000 so that our experts can review your options. Providing you with impartial advice and having access to deals across the market, they will ensure you have the information you need to make the right decision for your mortgage needs.