Inflation Hits 2.9%: What It Means If You're Selling

By Lisa Hayes · 21 August 2026

UK inflation went back up in July. The ONS confirmed on 19 August that CPI rose to 2.9% in the 12 months to July 2026, up from 2.6% in June — the first increase in the annual rate since March. For anyone selling a home this autumn, the practical translation is blunt: the cheap-mortgage recovery that agents have been promising since spring has just been pushed further away, and your buyer's borrowing power is being squeezed at exactly the moment supply is at a twelve-year high.

What actually happened to inflation in July 2026?

The headline number is the Consumer Prices Index, and it rose by 2.9% in the 12 months to July 2026, according to the Office for National Statistics. That's up from 2.6% in June. On a monthly basis CPI rose 0.3%, against 0.1% in the same month last year.

CPIH — the ONS's more comprehensive measure, which folds in owner occupiers' housing costs — rose by 3.1%, up from 2.8%. That matters more than most people realise for homeowners, because the owner-occupier housing component makes up roughly 18% of the CPIH basket, and its own annual rate climbed from 3.3% to 3.7%.

Both measures had been drifting down since March. July broke the run. It was the first time since March 2026 that either 12-month rate had increased.

Here is the path so far this year, straight from the ONS bulletin:

Month (2026)	CPI 12-month rate	CPIH 12-month rate	Owner occupiers' housing costs
January	3.0%	3.2%	3.9%
February	3.0%	3.2%	3.8%
March	3.3%	3.4%	3.6%
April	2.8%	3.0%	3.6%
May	2.8%	3.0%	3.3%
June	2.6%	2.8%	3.3%
July	2.9%	3.1%	3.7%

Look at that April-to-June stretch. Three months of steady, unglamorous improvement. Markets had started pricing in cuts. Then July arrived and undid a chunk of it in one go.

Why did inflation rise when the economy is clearly slowing?

One word: energy.

The housing and household services division — which includes your gas and electricity — saw its annual rate jump from 2.7% in June to 4.1% in July. Within that, gas prices rose 14.7% in a single month. The ONS notes this was the largest monthly rise in gas prices since October 2022, when the Ukraine energy shock was first hitting British bills. Electricity rose 3.6% over the month, against a 3.8% fall a year earlier.

That came from the Ofgem price cap. The regulator's July change took the annual bill for a typical dual-fuel household paying by direct debit to £1,862 — a rise of £221.

And here's the detail worth pausing on, because it explains a lot about the next six months. Ofgem sets each quarter's cap using a 12-week wholesale assessment window. For the July-to-September cap, that window ran from 18 February to 18 May 2026. It was the first assessment period affected by the outbreak of the conflict in the Middle East. What happened in wholesale gas markets in the spring is only now landing on household bills — and only now showing up in the inflation data.

• 2.9%CPI, 12 months to July 2026
• 14.7%monthly rise in gas prices
• £1,862Ofgem typical annual dual-fuel bill
• 5.61%average two-year fixed mortgage, 18 Aug

There were smaller upward pushes elsewhere. Furniture and household goods went from -0.2% to +1.0% annually; prices usually fall in July, and they did, but by only 0.4% — the smallest July drop since 1989. Clothing and footwear swung from -0.5% to +0.5%, with the ONS pointing to earlier-than-usual discounting in June and warm weather bringing spending forward.

Pulling the other way: transport. Its annual rate dropped from 5.7% to 3.6%, the single largest offsetting contribution. Without it, July's number would have looked considerably worse.

Is this the "bad" kind of inflation or the tolerable kind?

Mostly the tolerable kind, and this is where the headlines have been lazy.

Core CPI — which strips out energy, food, alcohol and tobacco, and is what the Bank of England actually watches for signs of entrenched inflation — was 2.6% in the year to July, unchanged from June. Services inflation, the stickiest component and the one that reflects domestic wage pressure, eased from 3.6% to 3.4%.

So the underlying picture didn't deteriorate. What deteriorated was the bill on your kitchen table.

That distinction matters because a central bank can, in principle, look through an energy shock. It's a one-off level effect that drops out of the annual comparison twelve months later. Raising interest rates doesn't reduce the wholesale price of gas.

The problem is that the Bank has been burned before. Energy spikes have a habit of feeding into wage demands and business pricing, and once that happens you're no longer dealing with a one-off. That's the argument the hawks on the committee are making, and July's data gives them ammunition even though core inflation didn't move.

What does this mean for the Bank of England and the base rate?

The MPC held Bank Rate at 3.75% on 30 July 2026. The vote was 6–3, with three members wanting an immediate quarter-point rise to 4%.

Read that again, because it's the most important number in this article. Not one member voted to cut. Three voted to hike. That is a committee with its finger nowhere near the trigger.

At the start of 2026, markets expected two cuts this year. That expectation has been steadily dismantled — first by the Middle East conflict pushing up energy costs, now by an inflation print that confirms those costs are working through to consumers. The next CPI release lands on 16 September, one day before the MPC's next decision on 17 September. Those two dates will do more to shape autumn mortgage pricing than anything an estate agent tells you.

My honest read: a cut in September is now unlikely, and anyone selling on the assumption that cheaper money is about to rescue their asking price is planning around a hope, not a forecast.

So what's actually happening to mortgage rates?

Less than you'd think, and that's the interesting part.

According to Moneyfacts, the average two-year fixed rate was 5.61% on 18 August, down a hair from 5.62% at the end of July. Fixed mortgage pricing is driven by swap rates — the market's bet on where interest rates go over the next two or five years — not by today's base rate. Swaps had already priced in a fair amount of bad news. July's CPI print largely confirmed what the market suspected rather than surprising it.

The result is a stubborn plateau. Lenders have been trimming individual products to win business while the average barely moves. You'll see "lender cuts rates" headlines most weeks. They're true, and they're mostly noise.

What you should take from this: don't wait for a rate cliff that isn't coming. The gap between what buyers could borrow in early 2025 and what they can borrow now is baked in for the foreseeable future. If you want a plain-English breakdown of the terms lenders and agents throw around, our property jargon explained guide covers the ones that actually cost you money.

Does inflation actually hurt homeowners?

Not straightforwardly, and it's worth understanding why, because the answer depends on whether you're staying or going.

If you own a home with a mortgage and you're not moving, inflation is quietly working in your favour. Your debt is a fixed nominal sum. Every year of price rises erodes what that sum is worth in real terms, while wages and — usually — property values drift up around it. Someone who borrowed £200,000 in 2019 owes a meaningfully smaller slice of the economy today than they did then. That's the mechanism that has bailed out British homeowners for four decades.

The catch is the interest rate attached to it. Inflation only flatters your balance sheet if the cost of servicing the debt doesn't rise faster than the erosion. Between 2021 and 2023 that's exactly what went wrong for millions of households, and it's why the current 5%-plus fixed-rate environment still bites even with inflation near target.

If you're selling, the calculation flips. You're not benefiting from slow nominal erosion any more — you're crystallising a price today, in a market where your buyer's borrowing capacity has been reset downwards. The 2.0% annual growth in official house prices is, in real terms against 2.9% CPI, a small loss. Your home is worth marginally less in purchasing power than it was twelve months ago, even though the number on the valuation went up.

Nobody puts that on a "For Sale" board. It's still true.

Selling or remortgaging — which decision does this change?

Different situations, different answers.

If you're coming off a fixed rate in the next six months, this print reinforces the case for acting early rather than rolling onto a standard variable rate and hoping. Most lenders let you secure an offer several months ahead and switch if rates improve before completion. With three MPC members voting to raise, the risk is no longer symmetrical.

If you're selling and buying in the same market, the flat picture is close to neutral. You may get less than you hoped for your current home, but the one you're buying is priced in the same conditions. Sellers who fixate on maximising the sale price and ignore what they're paying on the purchase usually end up worse off — particularly if a long marketing period means they lose the onward property.

If you're selling to release equity and not buying again — downsizing, executors handling probate, or a separation — you're the most exposed to a slow market, because there's no offsetting purchase to soften a lower price. For this group, speed and certainty often carry more genuine value than the headline figure.

What does this mean for house prices?

The official data and the asking-price data are telling different stories, and you need both.

On the official side, the ONS and Land Registry put the average UK house price at £272,000 in June 2026, up 2.0% over twelve months. Modest, positive, unspectacular. That's completed-sale data, so it reflects deals agreed months earlier.

On the forward-looking side, Rightmove reported that new sellers' asking prices fell 2.0% in the month to August, from £372,359 to £364,999. That's the largest August drop since 2018, and it leaves average asking prices around 1.0% below where they were a year ago.

Asking prices are sentiment. Sold prices are history. When the two diverge this sharply, the asking-price figure is usually the better guide to what's coming — because it's sellers and their agents responding in real time to what isn't selling.

Add the supply picture and it gets clearer. Rightmove has flagged the number of available homes running close to a twelve-year high for the time of year. More stock, flat borrowing power, cautious buyers. That combination doesn't produce a price crash. It produces something slower and more grinding: long marketing times, more reductions, and a widening gap between homes that sell and homes that sit. You can see the longer-term trend on our UK house prices tracker.

What this means if you're selling this autumn

Strip away the macroeconomics and here's the situation in your street.

Your buyer is a real household with a real budget. That budget is now being pressed from two directions. Their mortgage costs haven't fallen — the average two-year fix is still north of 5.5%. And their energy bill just went up £221 a year. A lender's affordability assessment factors in committed expenditure, so higher bills don't just make buyers feel poorer, they can literally reduce the maximum a lender will advance.

Meanwhile there are more homes on the market than at almost any point in over a decade for August. Your buyer has choice. They are not in a hurry, and they know it.

The homes that are selling have one thing in common, and it is not the kitchen. It's the price. Rightmove's own data has shown that a large majority of homes completing this year sold without ever needing a price reduction — which tells you those sellers priced correctly on day one and got on with it. The ones that launched high are still sitting there, cutting in slow-motion, watching their listing go stale.

Overpricing in this market isn't ambitious. It's expensive. Every week on the portal without an offer trains buyers to read your property as a problem, and by the time you reduce, the audience that would have paid your original price has already bought something else.

What should you actually do now?

1. Get a realistic valuation, and get more than one. Not the highest number an agent will give you to win the instruction. The number a buyer with a 2026 mortgage offer will actually pay. Our guide on how much your house is worth walks through how to sense-check the figures you're given.

2. Price at or slightly below the comparable evidence. In a market with this much stock, being the obvious value in your bracket is worth more than an extra £10,000 on the asking price you'll never see.

3. Assume no rate cut before you complete. If your plan needs September's decision to go your way, it isn't a plan.

4. Fix the cheap stuff that affects running costs. With energy bills back in the headlines, EPC ratings and heating systems are getting more buyer attention than they did two years ago. A draughty, expensive-to-run home is a harder sell in an autumn where everyone has just seen their gas bill.

5. Be honest about your timeline. If you need to be out by a fixed date — a job move, a chain, a probate deadline, a separation — the open market's current pace is a genuine risk. Average marketing times have stretched considerably this year.

6. Know your alternatives before you need them. If speed and certainty matter more than squeezing out the last few percent, a fast house sale or a regulated cash house buyer can complete in weeks rather than months. You'll accept a discount to market value for that. Whether it's worth it depends entirely on what a six-month delay would cost you — and only you can do that maths.

How long does an energy-driven inflation spike usually last?

Mechanically, an annual inflation rate compares this month's prices with the same month a year ago. A one-off step up in the gas price raises the annual rate for exactly twelve months and then drops out, provided nothing else pushes it up again. On that arithmetic, July 2026's energy effect should start washing out of the figures around July 2027.

Two things could stop that happening. The first is a further escalation in wholesale energy markets feeding into the next Ofgem caps — the assessment windows are backward-looking, so we're always seeing the spring in the summer's bills. The second is second-round effects: if households push for higher pay to cover bills, and businesses pass those costs on, an energy shock becomes generalised inflation and the Bank has to respond with rates.

The reassuring signal in July's data is that this second channel isn't showing up yet. Services inflation, the best proxy for domestic wage pressure, came down. Core inflation didn't move. If those two hold through September and October, the hawkish case weakens considerably and the rate-cut conversation restarts — probably in the first half of 2027 rather than this year.

Which is a long way of saying: this is likely a bump, not a regime change. It's also cold comfort if you need to sell before Christmas.

What about the Budget?

It's the elephant in every seller's living room. Speculation about property taxation ahead of the autumn Budget has been persuading some buyers and sellers to sit on their hands, and uncertainty is doing real damage to transaction volumes.

I won't pretend to know what's in it. Nobody outside the Treasury does. What I'd say is this: waiting for the Budget only makes sense if you believe the outcome will be favourable to you specifically, and that the market will reprice upwards afterwards. History suggests a more likely pattern is a burst of pent-up activity from people who postponed, all landing at once — which means more competing stock, not less. If you're going to sell in the next six months, the crowd is not your friend.

What to watch next

Three dates worth putting in your diary if you're selling this autumn:

• 16 September — the next ONS consumer price inflation release, covering August. If energy effects persist and core inflation starts drifting up, autumn mortgage pricing gets worse.
• 17 September — the Bank of England's next rate decision. Watch the vote split as closely as the decision itself. If the hawks pick up a fourth vote, the market will reprice quickly.
• The next Ofgem cap announcement — because the wholesale window feeding it will capture whatever's happened in energy markets over the summer, and that's what determines whether this inflation bump is a blip or a trend.

The honest summary

July's inflation figures were not a disaster. They were an energy bill in statistical form. Core inflation held, services inflation fell, and the underlying disinflation story is intact.

But intact is not the same as improving fast enough to help you this year. Three MPC members want higher rates. Mortgage pricing has stalled at levels that meaningfully constrain what your buyer can borrow. Supply is unusually high and asking prices are falling. That is not a market that rewards optimism about price.

It is, however, a market that still transacts — plenty of homes are selling, at sensible prices, to buyers who are picky but real. Price it right, present it well, and be clear-eyed about how long the open market will take.

If you're weighing a traditional sale against a faster route, it's worth seeing the numbers side by side before you commit to either. Compare offers from vetted buyers and you'll at least know what certainty is actually costing you — no obligation, and no pressure to take it.