UK inflation falls to 2.6% but housing affordability concerns persist
UK inflation dropped to 2.6% in the 12 months to June 2026, down from 2.8% the previous month, according to the latest Consumer Prices Index (CPI) data from the Office for National Statistics.
The figure matches the rate recorded in March 2025 and represents the lowest level since December 2024, when inflation stood at 2.5%. On a monthly basis, CPI rose by 0.1% in June 2026, compared with a 0.3% increase in June 2025.
Transport costs and food prices provided the largest downward contributions to the overall inflation rate. However, industry experts caution that the decline may be temporary, with the 13% increase in the Ofgem energy price cap in July expected to push inflation higher in coming months.
Market implications for property sector
Nathan Emerson, Chief Executive of Propertymark, noted that whilst the movement closer to the Bank of England’s 2% target is positive, household affordability remains under pressure. “Although the figures mark a third consecutive fall, many households will likely continue to approach their finances with caution as not to overstretch their levels of incomings vs outgoings on key household items moving forward,” he said.
The affordability challenge continues to affect both prospective buyers and renters across the UK market, with recent analysis showing buying remains cheaper than renting in 41% of English and Welsh markets.
Victoria Scholar, Head of Investment at interactive investor, warned that “inflation is expected to rise again in next month’s data partly because of July’s 13% increase in the Ofgem energy price cap alongside the backdrop of resurgent Middle East tensions with US-Iran military strikes that have pushed Brent crude back above $90.”
She added that new government measures to tackle the cost-of-living, including a VAT cut on electricity bills and a cap on most bus fares, could provide near-term relief. However, the longer-term inflationary impact depends on funding mechanisms, with borrowing potentially pushing inflation higher whilst tax increases or spending cuts elsewhere could offset this effect.
Mortgage market response
Ben Thompson, Director of Home Moving Strategy at the Mortgage Advice Bureau, said the inflation drop puts the Bank of England’s next move back in focus, though no further base rate increase is currently expected given weak domestic economic performance.
“Whether you’re a first time buyer or a remortgager coming off a cheaper fixed deal, it’s worth exploring options sooner rather than waiting later to see what happens,” Thompson stated. “For both groups, locking in a rate you’re comfortable with now is often a smarter move than waiting on the chance of a better one later.”
The inflation data comes as the property sector continues to navigate broader affordability challenges affecting both buyers and renters, with household finances remaining stretched despite the recent decline in the headline inflation rate.
Industry observers will monitor July’s inflation figures closely to assess whether the June decline represents a sustained trend or temporary relief before energy price increases feed through to the wider economy.
