Inflation Hits 3.1%: What It Means If You're Selling Now

By Lisa Hayes · 16 September 2026

UK inflation rose to 3.1% in the 12 months to August, up from 2.9% in July, according to figures published by the Office for National Statistics at 7am this morning. That single number lands roughly 24 hours before the Bank of England announces its next interest rate decision, and it has already done its damage: lenders spent the past fortnight repricing mortgages upwards, and the average two-year fixed rate now sits at 5.73%. If you are thinking about selling this autumn, the practical consequence is simple. Your buyer can borrow less than they could in the spring, and that gap is still widening.

• 3.1%CPI inflation, year to August 2026 (ONS)
• 5.73%average two-year fixed mortgage rate (Moneyfacts)
• 3.75%Bank of England base rate, unchanged since December
• +£1,572extra annual cost on a £250k mortgage since March

What actually happened this morning?

The ONS published its August consumer price figures at 7am. The Consumer Prices Index rose by 3.1% over the twelve months to August, up from 2.9% in July and the highest reading in five months. On a monthly basis prices rose 0.5%, compared with 0.3% in July.

That was broadly what economists had pencilled in. Markets had priced a figure of around 3.1%, so nobody in the City fell off their chair. The number itself was not a shock.

What it confirms is the direction of travel, and the direction of travel is the problem.

Inflation bottomed out at 2.6% in June. It has now risen for two consecutive months. Back in January, the Bank of England expected CPI to drift back to around 2% from April and stay there for the rest of the year. Instead the conflict in the Middle East, the near-closure of the Strait of Hormuz and the energy price shock that followed have pushed the whole forecast off course.

One genuinely encouraging detail sits underneath the headline. Core CPI, which strips out energy, food, alcohol and tobacco, held at 2.6% in August, unchanged from July and down from 3.1% in January. Services inflation, the measure the Bank watches most closely because it reflects domestic wage and price pressure rather than global oil markets, was 3.4% in July, down from 3.6% in June and well below the 4.4% recorded in January.

In plain English: the rise in inflation is mostly coming from things arriving on ships and through pipelines, not from a wage-price spiral inside the UK economy. That distinction matters enormously for what the Bank does next, and almost nobody in the morning headlines will mention it.

Why 3.1% matters more than the number suggests

Here is the detail that makes today's figure genuinely significant rather than just another data point.

On 30 July, the Bank of England's central projection had CPI inflation peaking at around 3.2% in the fourth quarter of 2026. That was the top of the mountain in the Bank's own forecast, the level it expected to reach in November or December before easing back down.

We are in September. The reading is 3.1%.

Inflation has effectively arrived at the Bank's projected peak a full quarter early, and the pressures pushing it there have not gone away. The Ofgem energy price cap rises by another 4% on 1 October, taking the typical dual-fuel direct debit bill from £1,663 to £1,723 a year. Petrol averaged over 169p a litre on 15 September, with diesel above 191p. Producer prices, which tend to feed into shop prices a few months later, rose 3.7% in the year to August, up from 3.3%.

The Bank itself said in July that risks to its inflation outlook were "tilted to the upside". Forecasters have since gone further. Sanjay Raja, chief UK economist at Deutsche Bank, expects headline CPI to peak above 3.5% in the fourth quarter, "with risks that inflation could even push closer to 4% given recent energy price moves". Thomas Pugh, chief economist at RSM UK, thinks inflation peaks at almost 4% in 2027. Economists surveyed by the Treasury on 19 August put the Q4 average at 3.3%.

None of those people are alarmists. They are describing an inflation path that runs hotter and longer than the one the Bank built its current rate stance around.

What will the Bank of England do tomorrow?

Almost certainly nothing.

The Monetary Policy Committee announces its decision on Thursday 17 September, and the overwhelming expectation is another hold at 3.75%. That would be the sixth consecutive meeting without a change. Bank Rate has sat at 3.75% since December.

Matt Swannell, chief economic adviser to the Item Club, put it bluntly: "It looks a near certainty that the MPC will leave Bank rate unchanged at 3.75%."

The interesting bit is the vote and the language. At the July meeting the committee split six to three. Huw Pill, the Bank's own chief economist, along with Megan Greene and Catherine Mann, voted to raise Bank Rate to 4% as a pre-emptive move against second-round inflation effects. Pill repeated that call publicly on 3 September. Most economists expect the same three to vote for a rise again tomorrow.

Pantheon Economics reckons the MPC could "toughen its language" this week, leaving the door open to an increase as soon as November. Their line was memorable: "A 4% inflation peak would already be too hot to hold, but further energy price rises could take inflation even higher. The MPC needs to be ready."

So the decision itself is a non-event. What comes after it is not.

Your buyer's mortgage has already got more expensive

This is the part most homeowners miss, and it is the part that actually affects what your house sells for.

Fixed mortgage rates are not set by the Bank of England base rate. They are set by swap rates, which move on what markets expect base rate to do over the next two or five years. Swap rates have climbed above 4.70%. Lenders have responded, and they have not waited for Thursday.

According to Moneyfacts, NatWest, Santander, HSBC, Lloyds Bank and TSB have all increased mortgage rates twice since the start of September. Nationwide and several other building societies have repriced for a second time as well. Others have simply pulled products and replaced them at higher prices.

Moneyfacts average rate	Start of March 2026	Now (15 Sept 2026)	Change
Two-year fixed	4.84%	5.73%	+0.89%
Average new mortgage rate	4.90%	5.68%	+0.78%

Moneyfacts calculates that for someone taking a £250,000 mortgage over 25 years, the move from 4.84% to 5.73% adds £131 to monthly repayments, or £1,572 a year.

Rachel Springall, finance expert at Moneyfacts, described it as "a second wave of mortgage rate hikes" from the major banks, adding that the average two-year fixed rate is now at its highest point since June and the average five-year fix is back to levels last seen in April. Her assessment of the impact on borrowers was one word: "hugely disappointing".

Translate that into the thing you care about. A buyer who was approved for a certain monthly payment in March can now borrow meaningfully less for the same money. They have not become less keen on your house. They have become less able to pay for it. That is why the offers you receive this autumn may look softer than the valuations you were given in the spring, and why understanding what your house is genuinely worth today matters more than what a portal estimate told you six months ago.

The 750,000 households nobody is talking about

There is a second, quieter pressure building underneath the market.

The Bank of England estimates that 750,000 households with a fixed rate expiring during 2026 are currently paying an interest rate below 3%. Every one of them will roll onto something starting with a five.

Some have already acted. Figures from the Financial Conduct Authority show 381,364 mortgages were locked into a new deal up to six months ahead of maturity during the second quarter of 2026, following 499,271 in the first quarter. That is a remarkable amount of forward-planning, and it tells you people can see what is coming.

Why does this matter to a seller? Two reasons.

First, a household absorbing several hundred pounds a month of extra mortgage cost is not a household that offers over the asking price. Second, a proportion of those 750,000 will look at the new payment, look at the house, and decide to move rather than absorb it. That creates supply. More homes on the market, competing with yours, at exactly the moment buyers have less to spend.

Is this 2022 all over again?

No. And the comparison is worth killing off early, because it drives people into decisions they regret.

In autumn 2022, inflation hit 11.1%, gilt markets seized up over a weekend, and hundreds of mortgage products were withdrawn within days. Buyers who had offers in principle found them void. Chains collapsed en masse.

What is happening now is slower and, frankly, more manageable. Inflation is at 3.1%, not eleven. Products are being repriced rather than pulled wholesale. Lenders are still lending, and remortgage activity has stayed strong throughout the volatility.

That said, the bond market is genuinely tense. The yield on ten-year gilts touched a 19-year high last week before easing two basis points to 5.351% on Friday. Gilt yields matter to you because they anchor swap rates, and swap rates set your buyer's mortgage. The European Central Bank has raised rates twice this year, citing the same energy-driven inflation. Brent crude retreated more than 2.5% on Friday to below $105 a barrel, having risen sharply earlier in the week. Energy prices are the variable that decides how the next six months go, and nobody forecasting them has covered themselves in glory lately.

So: not a repeat of 2022. But not a market you can take for granted either.

What is actually happening to house prices right now?

Mixed, and worth reading carefully rather than by headline.

Nationwide reported annual house price growth of 1.6% in August, up slightly from 1.4% in July, with prices up 0.2% on the month. Its average UK house price stood at £275,465. That is subdued but positive, and weaker than the 2.1% recorded in August 2025 and the 2.4% in August 2024.

Rightmove, which measures asking prices rather than sold prices, told a harsher story. Average new-seller asking prices fell 2.0% in August, down £7,360 to £364,999. That was the largest August fall since 2018, and steeper than the ten-year August average of -1.3%. Asking prices were 1.0% lower than the same month a year earlier. Rightmove has downgraded its 2026 forecast from +2% to somewhere between 0% and -2%.

Lloyds has recorded the first annual fall in its house price measure since November 2023.

The three indices disagree because they measure different things at different points in the transaction. Rightmove captures what sellers hope for on day one. Nationwide and Lloyds capture what lenders actually approved, months later. When those two diverge as sharply as they have this summer, it usually means one thing: sellers' expectations are running ahead of what buyers can fund.

The activity data supports that reading. Mortgage approvals in July fell to their lowest level since December 2023. The RICS residential survey for August put new buyer enquiries at -19%. Sales agreed have fallen for four consecutive months.

Regionally the picture splits. Scotland and the north of England have continued to see year-on-year growth. London and the south of England have seen average prices fall, with London carrying its largest choice of homes for sale since 2010. If you are selling in the capital or the south east, you are competing against more stock and softer demand than the national numbers imply. There is more detail on how these regional patterns are playing out in our guide to UK house prices in 2026.

What does today's inflation figure mean if you're selling?

Let me be straight with you, because the industry commentary on days like this tends to be mush.

The single most useful conclusion from today: the "wait for rates to come down" strategy is finished.

For most of 2025 and early 2026 there was a defensible argument for sitting tight. Base rate was expected to fall, mortgage costs would ease, buyer budgets would recover, and a seller who waited six months might genuinely do better. That argument no longer holds. Moneyfacts notes that economists now expect a hold this week followed by a 0.25% rise in November, with speculation that four of the five policy decisions between February and July 2027 will also be increases. On that path, Bank Rate would go from 3.75% to 5.00% by the end of July 2027.

I would not treat that as a forecast to bank on. Market expectations have been wrong repeatedly over the past three years, in both directions. But you cannot build a selling strategy on a rate cut that essentially nobody credible is now predicting.

What should you actually do now?

Price to today's buyer, not to last spring's valuation. If your home was valued in March and you are still marketing at that number, you are asking an autumn buyer to pay a spring price with an autumn mortgage. Rightmove's own data shows new sellers dropped asking prices by 2% in August for exactly this reason. Being first to adjust is far cheaper than being last.

Check how long you have been listed. Buyers treat time on market as a price signal before they have even seen your photos. If your property has been sitting for months, the listing itself is now working against you. It is worth knowing precisely how long a property has been on the market and how that shapes what buyers assume.

Interrogate your buyer's finances, not just their offer. In a market where rates move twice a month, a buyer with a mortgage offer secured at a lower rate is worth more to you than a buyer offering slightly more with nothing agreed. Ask when their mortgage offer expires. Ask whether the rate is locked. A high offer that collapses in November because affordability was recalculated is worth nothing.

Reduce the number of links in your chain. Every additional party is another household exposed to rising payments and another point where the whole thing can fail. Chain-free routes such as cash house buyers exist precisely for this environment, though they come with a price trade-off you should understand properly before going near one.

Be honest about your deadline. If you need to be out by a fixed date, speed has a value and you should price accordingly. If you have no deadline at all, you have the luxury of holding out for the right buyer. Most people are somewhere in between and never actually work out which. It is worth ten minutes to compare the different routes to a sale and what each one realistically costs you in time and money.

If you are staying put, sort your own mortgage now. This is not selling advice, but it is the most valuable thing on this page for a lot of readers. If your fixed rate expires in the next six months and you are currently paying under 3%, you are one of the 750,000 the Bank of England has flagged. Most lenders let you secure a new rate up to six months ahead of maturity, and you can usually switch to a better deal if rates fall before completion. The 381,364 households who locked in during the second quarter were not being paranoid.

Do not confuse a low offer with a bad offer. An offer that is 8% below asking but completes in four weeks with no chain can leave you better off than one at full asking that drags for six months while you pay a mortgage, bills and council tax on a house you have mentally left. Run the arithmetic. Our breakdown of what percentage of market value cash buyers actually pay sets out where the real numbers sit.

What happens next?

Three things to watch over the next eight weeks.

Thursday's language. The decision is a foregone conclusion. The minutes are not. If the three hawks become four, or if the committee's wording hardens noticeably, expect swap rates to move again and mortgage pricing to follow within days.

The October energy cap. The 4% rise on 1 October feeds directly into the October and November inflation figures, published in November and December. If those readings push past 3.5%, a November rate rise stops being speculation.

The Budget. The Chancellor's Budget lands next month, and property taxation has been openly discussed in the run-up. Uncertainty alone tends to slow transactions, as buyers and sellers wait to find out the rules before committing. That is not a reason to panic, but it is a reason not to assume the market gets easier in November than it is now.

My honest read is this. The next six months look like a market where inflation stays uncomfortably above target, borrowing costs drift higher rather than lower, and prices grind sideways to slightly down while transaction volumes stay thin. That is not a crash. Nobody credible is forecasting one. But it is a market that rewards sellers who are realistic and punishes those who are waiting for conditions that are not coming back.

A final thought

Days like today produce a lot of noise. Inflation ticks up two tenths of a percent and the coverage swings between "cost of living crisis deepens" and "inflation broadly in line with expectations", which are both true and neither of which tells you what to do with your house.

The useful version is narrower. Buyers have less money than they did in March. They will probably have less again by Christmas. If you are selling, that is the entire story, and it points in one direction: get realistic about price now rather than in six months, and take certainty seriously when it is offered to you.

If you want to see what your home would fetch today from buyers who are actually funded and actually ready, it costs nothing to find out. Compare offers side by side and make the decision with real numbers in front of you, not a valuation from a market that has since moved on. And if the open market has already had a go and not delivered, our guide on how to sell a house fast walks through the alternatives without the sales pitch.