Britain’s rich hit most by inflation and high interest rates
Reasons include high mortgage costs and bigger price rises for discretionary items
BRITAIN’S richest households are experiencing higher rates of inflation than poorer segments of society because of high mortgage costs and rapid price increases in restaurants and hotels.
The most wealthy 10th of households – arguably those most able to weather rising costs – saw an inflation rate of about 5 per cent in March, according to data released on Thursday (May 30) by the Office for National Statistics (ONS).
That marks a shift from a year ago when the poorest were suffering higher inflation rates. The 10 per cent of the population with the lowest incomes are now seeing a 3.9 per cent rise in costs.
The figures show how the sharp cooling in energy and food inflation has alleviated the pressure on the finances of the worst off in Britain. The poorest spend a disproportionate amount of their incomes on these bills and were therefore hit harder when inflation soared following Russia’s invasion of Ukraine.
While the richest are more able to absorb the blow of the cost-of-living crisis, they are now seeing high mortgage costs and bigger price rises for discretionary items they buy more of, notably restaurants and other services. Inflation across the economy has dropped sharply from a peak of 11.1 per cent in late 2022 to 2.3 per cent in April.
The ONS figures use their Household Costs Indices, which are different from the benchmark Consumer Prices Index as they include changes in mortgage interest rates and other costs from buying property.
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The Conservatives are counting on improving finances for consumers to lift the mood, especially in poorer parts of the country that backed the party in 2019. Many “red wall” seats in the north of England are expected to switch back to Labour at the election on Jul 4 after a drop in living standards since the 2019 vote.
Meanwhile, the Bank of England’s (BOE) struggle to stamp out sticky services inflation is squeezing high income households by more. Rapid restaurant and hotel price rises and high mortgage rates mean the richest are now suffering more from persistent inflationary pressures.
The figures laid bare the impact of 14 back-to-back interest rate rises by the BOE for mortgage holders. Inflation was at 5.5 per cent for this group after many refinanced at much higher mortgage rates, compared to just 3.3 per cent for those who own outright and 4.6 per cent for private renters.
The retired also had a much lower inflation rate than other groups at 3.4 per cent. BLOOMBERG
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