HOUSEHOLDS have been handed a boost after inflation fell more than expected.
The annual rate at which prices are rising slowed to 3.9% in November, down from 4.6% in October, according to the Office for National Statistics (ONS).
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That’s down from 4.6% in October, and 6.7% in September, and is the lowest it’s been since October 2021.
Experts had expected inflation to come in at around 4.3%.
The latest figures show prices are still rising, but at a slower rate than before.
It hit a peak of 11.1% in October 2022 putting a major squeeze on household budgets.
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The ONS said the biggest driver for inflation slowing was a fall in the price of fuel, food and household goods.
The falling price of items such as bread and secondhand cars contributed while the average cost of unleaded petrol fell to 142.57p per litre, its lowest level in two years, according to the RAC.
Food prices have fallen for eight months in a row, from a 45-year high of 19.6% in March to 4.2% last month.
Grant Fitzner, chief economist at the ONS, said: “Inflation eased again to its lowest annual rate for over two years, but prices remain substantially above what they were before the invasion of Ukraine.
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“The biggest driver for this month’s fall was a decrease in fuel prices after an increase at the same time last year.
“Food prices also pulled down inflation, as they rose much more slowly than this time last year.
“There was also a price drop for a range of household goods and the cost of second-hand cars.
“Factory gate prices remain little changed over the past year, while on an annual basis the change in costs that producers pay for raw materials and fuel was negative for the sixth consecutive month.”
The latest figures means the Prime Minister Rishi Sunak has further met his promise to half inflation by the end of 2023.
But the rate is still higher than the Bank of England‘s target rate of 2%.
The Bank has hiked interest rates in a bid to control inflation, pushing up borrowing costs for millions of homeowners.
Last week it kept interest rates unchanged at 5.25% following the recent drop in the inflation rate.
Dean Butler, managing director for Retail Direct at Standard Life, said “times are still tough for many”, but the latest figures would be welcomed by consumers.
He added: “Inflation falling further than expected will take some of the strain off struggling households and some people think it could lead to the Bank of England lowering the base interest rate next year, which would help people with mortgages or unsecured debt, like payday loans or credit cards.”
Mortgage rates have also come down in recent weeks on the latest outlook that inflation is easing and rate rises could ease.
The Governor of the Bank, Andrew Bailey, said at the most recent rate decision “there is still some way to go” to get inflation back to 2%.
There have been calls to drop the base rate after GDP, a measure of growth in the UK economy, shrunk by 0.3% in October.
Economists had expected GDP to contract by just 0.1% but the figures could reignite concern the UK economy is heading for recession.
Chancellor of the exchequer Jeremy Hunt said: “With inflation more than halved we are starting to remove inflationary pressures from the economy.
“Alongside the business tax cuts announced in the Autumn Statement this means we are back on the path to healthy, sustainable growth.”
What slowing inflation means for your money
Inflation is a measure of how much a basket of everyday essentials is rising by, so the lower the figure, the better it is for your pocket.
However, despite it falling to 3.9% in November, it still means the price of goods is rising, just at a slower rate.
Either way, slowing inflation means the Bank of England is less likely to hike its base rate, which can see rates on savings accounts fall.
For that reason, now might be a good time to set up a savings account if you were already thinking about it.
Karen Barrett, chief executive officer and founder of Unbiased.co.uk, said: “Now is the time to fix your savings if you haven’t already, as rates have already fallen from the peak of over 6% that they’ve reached in recent months.
“You can do this with a long-term fixed-rate account, or by investing, but you should ensure you have a long-term strategy that’s appropriate for your situation.”
Falling inflation also means mortgage rates are likely to fall, as they tend to drop when the Bank of England lowers its base rate.
Interest rates could be cut by the Bank of England as soon as May, experts have predicted, but home loan rates have already started falling in expectation of a base rate fall.
Mortgage rates look set to fall below 4% within weeks.
David Hollingworth, associate director at L&C Mortgages said: “As market expectation of the chance for the next move in base rate to be down has grown, lenders have passed through improvements in funding costs.
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“Today’s news is likely to further that trend, which could soon see 5-year fixed rates soon closing in on the 4% marker.
“That would be a big boost for homeowners coming towards the end of their current, low fixed rates and bracing themselves for the inevitable hike in monthly payments.”
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