How is Inflation Impacting Homeowners? Here’s What You Need to Know

The impact of inflation on homeowners is a topic of discussion as they grapple with the financial strain caused by escalating prices.

The implications of inflation are significant for homeowners, particularly in relation to mortgages. (Photo: Rock Real Estate)

Impact of Inflation on Homeowners

The issue has been highlighted by Oliver Rust, the head of product at Truflation, an independent inflation data-aggregator, who has analyzed the current inflation data in the United Kingdom.

According to Digital Journal, the continuous increase in interest rates throughout the year has resulted in rising mortgage costs, putting UK homeowners in a precarious position.

Contrary to the official figures released by the government’s Office of National Statistics (ONS) in June 2023, which showed UK inflation at 8.7 percent, Truflation’s own live UK CPI index indicates that inflation is closer to 12 percent. Truflation’s index is compiled in real-time using millions of data points, making it a more accurate representation of the actual inflation rate.

The implications of inflation are significant for homeowners, particularly in relation to mortgages. Rust notes that there has been a decrease in the annual price growth of owned property, including the price of homes and other associated costs. This decline, from 108 percent to under 40 percent since March, poses a unique threat to homeowners as interest rates and mortgage costs continue to rise.

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Struggles of Homeowners

According to the OECD, Britons are struggling with 148 percent household debt to income, placing the UK among the top ten most indebted nations in Europe.

The average two-year mortgage rate has risen to around 6 percent, up from 5.3 percent at the beginning of May, adding to the financial strain experienced by homeowners.

As the Bank of England remains committed to combating inflation, the pressure on homeowners is expected to intensify.

According to Money Crashers, high inflation tends to help homeowners more than it hurts them — at least in raising their home’s value and shrinking the real cost of ownership.

In conclusion, Rust suggests that UK homeowners should prepare themselves for rising costs and falling prices in the coming months.

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