A review of the Consumer Price Index

While there are other measures we can use to measure inflation and deflation, the Consumer Price Index (CPI) is one of the most popular. It’s a useful tool we can use to track the fluctuations of price, inflation, and the cost of living.

What is the consumer price index?

The monthly CPI report uses a combination of survey methodologies, price samples, and index weights to measure the average fluctuations in what consumers are paying for a basket of goods. These index weights, which are criteria made to measure how specific markets are performing, are important markers for change, and make it easier to track how the cost of living is shifting.

It’s the main domestic UK measure of inflation for what we call macroeconomic purposes, which is a branch of economics most concerned with large-scale changes and productivity.

What is the CPIH?

You may have stumbled on the two terms in your own research, and while they are similar, there is one core difference. The CPI doesn’t take into account the cost of housing. The CPIH does. One of the primary differences is that it considers owner occupiers’ housing costs as well as other factors. Hence the ‘H’ at the end.

As housing is one of our primary concerns, that’s what we’ll be looking at here.

A summary of the last few years

The CPIH remained relatively stable from 2012 through to 2017, and there have been some notable fluctuations from 2021. To track how these changes can impact modern life, let’s look at the CPI from 2019 to now1.

2019

The start of 2019 saw a CPI rating of 1.8, with minor changes up and down throughout the year, though even at its peak it only reach 2.1

2020

2020 came with a similar start though we saw a more dramatic shift downwards as the world moved through the first waves of the Covid-19 pandemic. We started 2020 at 1.8 and ended at 0.8, which was an attempt from the government to encourage spending.

2021

Early 2021 remained stable, sitting at a comfortable 0.9, 0.7, and 1.0 respectively. However, from April we saw the first signs of the rise in inflation. April jumped to 1.6 and rose steadily throughout the year. We wrapped up 2021 with a CPI rating of 4.8.

2022

2022 began with a CPI rating of 5.5 and has been on a rise since, with the current CPI rating sitting at 8.8 (as of July 2022).

Considering your options

As the CPI and CPIH ratings rise, so too will the interest rate. A result of this is that your mortgages will get more expensive. If you’re on a fixed rate, this isn’t a problem, but if your fixed rate is ending or you’re on a variable rate, consider remortgaging while the interest rates remain fairly low.

Speak to a mortgage adviser today for some guidance and advice. You may have to pay an early repayment charge to your existing lender if you remortgage.

1Office for National Statistics

Because we play by the book we want to tell you that…

Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.

Need more help?

Contact us