August 2026 inflation figures and housing cost trends

The Office for National Statistics published its consumer price inflation bulletin for August 2026 on 16 September 2026. The data show that the Consumer Prices Index including owner occupiers' housing costs, known as CPIH, rose by 3.3% in the 12 months to August 2026, up from 3.1% the previous month. The Consumer Prices Index, or CPI, rose by 3.1% in the same period, up from 2.9% in July.

Both measures have risen for a second consecutive month, the ONS reported in September 2026. Transport costs, particularly motor fuels, made the largest upward contribution to the change in CPIH annual inflation between July and August. Core CPIH inflation, which excludes energy, food, alcohol and tobacco, was 2.9% in August 2026, unchanged from July.

What CPIH and CPI measure

The ONS describes CPIH as the most comprehensive measure of inflation. It extends CPI to include a measure of the costs associated with owning, maintaining and living in one's own home, known as owner occupiers' housing costs, along with Council Tax. Both are substantial expenses for many households and are not included in the CPI, the ONS noted in September 2026.

CPI is based on a harmonised methodology developed by Eurostat, enabling international comparisons. It is also used to set the operational inflation target for UK monetary policy and to uprate working age benefits and tax credits, according to the ONS bulletin published in September 2026.

Owner occupiers' housing costs in the August data

The owner occupiers' housing costs component of CPIH rose by 3.9% in the 12 months to August 2026, up from 3.7% the previous month, the ONS reported in September 2026. This component accounts for approximately 18% of the CPIH and is the main driver for differences between the CPIH and CPI inflation rates, according to the bulletin.

The ONS measures owner occupiers' housing costs using a rental equivalence approach. This uses the same elementary aggregate indices as the private rented property index, reflecting the housing services associated with owning, maintaining and living in one's own home. The measure is distinct from the value of a home as an asset, and changes in asset value are out of scope of measures of consumer price inflation, the ONS methodology states.

Highlight

Housing services, principally owner occupiers' housing costs, made upward contributions to the change in the annual CPIH rate between July and August 2026, the ONS reported in September 2026.

Private rent inflation in August 2026

The ONS also published its Private rent and house prices bulletin on 16 September 2026. Average UK monthly private rents increased by 3.8% in the 12 months to August 2026, a provisional estimate. This annual growth rate is up from 3.7% in the 12 months to July 2026, the ONS reported in September 2026.

The Price Index of Private Rents measures private rent inflation for new and existing tenancies. Private rented property is a component of both the CPI and CPIH baskets, classified to the housing, water, electricity, gas and other fuels division, according to ONS methodology.

Why inflation figures matter for interest rate expectations

The Bank of England's Monetary Policy Committee sets interest rates in the UK. The government has given the MPC a remit to target an inflation rate of 2% over the medium term, usually thought of as a few years' time, the House of Commons Library noted in October 2026.

The Bank of England held Bank Rate at 3.75% at its most recent meeting, according to information published on its website. The MPC stated that inflation has risen to 3.1% and is expected to rise further as higher energy prices have their knock on effects. The longer energy prices stay high, the greater the risk of more persistent inflation, the Bank noted.

Where Bank Rate goes from here will depend on how the evidence, inflation outlook and risks around the outlook evolve, the Bank of England stated in its July 2026 Monetary Policy Report. The Committee stands ready to act as necessary to ensure that CPI inflation returns to the 2% target and stays there, according to the report.

Higher interest rates tend to affect mortgage rates for households and borrowing costs for firms, making people more cautious about spending. Financial markets and commentators watch inflation data closely because it informs expectations about the future path of interest rates, though forecasts can and do change.

Sketch running costs

What this means for households

Inflation affects the real cost of living. When prices rise faster than incomes, households can buy less with the same amount of money. Housing costs form a significant part of household budgets, whether through mortgage payments, private rent or the costs of maintaining a home.

The CPIH all services index rose by 3.6% in the 12 months to August 2026, unchanged from the 12 months to July, the ONS reported in September 2026. The CPIH all goods index rose by 2.7% in the 12 months to August 2026, up from 2.2% the previous month, and the rate in August was the highest since September 2025.

Anyone considering a property purchase, remortgage or other financial decision involving borrowing should speak to a qualified, regulated adviser. Personal circumstances vary widely, and professional advice takes into account individual situations, risk appetite and the full range of options available at the time.