21st December 2023
You will have heard in the news this week that ‘inflation’ has fallen to 3.9%. What does that mean for you?
If inflation falls, it means that the prices for goods and services are not increasing as quickly as before. In simpler terms:
- Cost of Living: The overall cost of living may not be rising as fast. This could mean that the prices of things like groceries, housing, and transportation are not going up as much.
- Mortgage: When inflation is lower, the Bank of England may decide to lower interest rates. This is because lower inflation typically means there is less pressure to increase interest rates to control rising prices. When interest rates are lower, it often leads to lower mortgage interest rates.
- Purchasing Power: Your money’s ‘purchasing power’ may increase. In other words, the same amount of money could buy you more goods and services than it could when inflation was higher.
- Savings: If inflation is low, the value of money saved in a bank or other savings account is not ‘eroding’ so quickly, allowing savings to keep more of their value over time.
The Bank of England have a target for inflation of around 2%. They consider this to be the ‘optimum’ level of inflation in order to keep the economy ticking over nicely.