The ONS said the largest contributor to the chunkier UK inflation rate stemmed from “housing and household services, mainly because of electricity and gas prices”. Consumer prices rose 0.6% in October from September, beating expectations of a 0.5% rise. In September, prices were flat from August.

Housing costs are over triple the current rate of inflation - rental prices and owner-occupied housing costs both increased by 7.4%. These high housing costs, combined with rising energy bills, could squeeze household budgets.

** UK housebuilders’ index .FTNMX402020 declines over 3% after British inflation jumped by more than expected last month to rise back above the Bank of England’s 2% target; underlying price growth gathered speed too, showing why the central bank is moving cautiously on interest rate cuts

** Consumer prices rose by an annual 2.3% in October, pushed up almost entirely by an increase in regulated domestic energy tariffs, after a 1.7% rise in September

** Services inflation – which the BoE views as a key measure of domestically generated price pressure – rose to 5.0% in October from 4.9% in September, the Office for National Statistics said, in line with BoE and market expectations

** Bank of England rate cuts filter down to lower mortgage rates, boosting demand for homes

Home builders have already been reporting expectations of cost increases in 2025 due to materials price rises.

Ruth Gregory, deputy chief UK economist at Capital Economics, said October’s “surprisingly large rebound” in CPI won’t stop the Bank of England from cutting interest rates further.

“But it lends some support to our view that the Bank will skip the December meeting and cut rates only gradually, by 25 basis points in February and at every other policy meeting until rates reach 3.5% in early 2026,” she added.

In housing, UK property prices rose 2.9% year-on-year in September, reaching an average of £292,000, despite slowing growth in London, where prices fell 0.5%.

Annual price growth in the North East led the UK at 6.5%.

On a seasonally adjusted basis, house prices dipped 0.1% monthly, signalling potential cooling in some areas.

“Mortgage rates are creeping up again, and inflation has now climbed back above the Bank of England’s 2% target, casting doubt over the strength of the housing market’s recovery,” said Rachael Hunnisett, director of April Mortgages.

“”If interest rates are slow to fall in the coming months, we may see house price rises soften as homebuyers become more cautious and demand falls.”

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