UK inflation moved higher than expected in December, complicating the outlook for interest rates and adding fresh uncertainty for mortgage advisers, borrowers and the housing market in early 2026.
The Office for National Statistics said Consumer Prices Index (CPI) inflation rose to 3.4% in the 12 months to December 2025, up from 3.2% in November. The increase, driven partly by higher airfares and tobacco prices, was above forecasts. While some of the rise reflects seasonal and timing effects linked to the Christmas period, it nonetheless gives the Bank of England’s Monetary Policy Committee more to consider ahead of its February meeting. The fact that inflation remains well ahead of 2% target means it is less likely that they’ll be able to cut interest rates – something the mortgage market would be so keen to see.
For mortgage advisers, the data matters because it feeds directly into expectations for base rate cuts, swap rates and fixed-rate mortgage pricing. With affordability still stretched for many buyers and remortgaging volumes set to rise this year, even small shifts in the inflation outlook can influence lender pricing, borrower confidence and housing market momentum.
Experts from across the mortgage and property sectors have shared their initial reactions to this morning’s data, commenting as follows:
John Phillips, CEO of Just Mortgages and Spicerhaart, said: “A jump in inflation in December may not be too much cause for concern, so long as it is a seasonal blip and not the start of inflation rising. It is hoped that once the Christmas effect works its way through, we see a return to the good progress made on easing inflation. Without another update until after the MPC decision in early February, this will be the central bank’s most recent reference point. Add in continued geopolitical and economic uncertainty, and I’d be surprised to see anything but a hold when the bank next meets in a couple of weeks.
“Nonetheless, the mortgage market has started 2026 with a spring in its step, as the pent-up demand of Q3&4 begins to release. There’s plenty for brokers to shout about at the moment with rates cut across all parts of the market and access to the most mortgage products since 2007 – particularly for first-time buyers. Lenders stand ready and willing to lend – brokers are ready to help buyers and movers navigate the market. It’s up to us to keep nurturing confidence and encouraging clients to push on with plans. We of course don’t know how the year will play out – particularly as President Trump continues to try and stake his claim to more territories and throw around more tariffs – but there’s definitely scope for more positive news in the mortgage market as the year progresses.”
Nathan Emerson, CEO of Propertymark, comments:
“To witness inflation creep back upwards again will no doubt be disappointing for many consumers who will have been hoping to see a drop as we move further into the first quarter of 2026. With luck, this will prove to be a small blip in what has otherwise been a sustained downward trend over recent months.
“However, some lenders have already started to offer more competitive mortgage deals, which should help invigorate the housing market throughout the year, alongside the general improvement in mortgage availability that has recently been highlighted by the Bank of England.
“Should inflation continue to trend downward overall during the course of the year, we should start to see a more buoyant mortgage market, reflecting a greater degree of affordability not seen for some time. This would be very welcome news for anyone hoping to approach the buying and selling process.”
Simon Webb, managing director of capital markets and finance at LiveMore, comments:
“The markets weren’t expecting inflation to rise again, and this is a blow to the Bank of England’s plans to bring inflation down to its 2% target. No-one wants a return to the rising prices over recent years so hopefully this is a minor setback on an otherwise downward trajectory.
“Looking at the bigger picture, the mortgage market is far less volatile than this time last year. For the later life lending market, a more stable outlook helps borrowers plan with greater certainty. Many over-50s are making financial decisions that span decades, and while short-term movements are inevitable, the long-term need for flexible, accessible borrowing options remains clear.
“This period offers a chance to strengthen conversations around building financial resilience in later life, ensuring older borrowers continue to benefit as the market evolves in a positive direction.”
Phoebus Software’s chief sales and marketing officer, Richard Pike, says:
“Inflation has been gradually falling from its August peak of 3.8% so it’s disappointing to see it tick up again. Hopefully this is a minor blip, fuelled by Christmas spending on alcohol, tobacco and transport, and we’ll see prices start to decrease again during the early part of 2026.
“Mortgage rates continue to come down due to fierce competition in the market, but the Bank of England will keeping a close eye on next month’s CPI figure ahead of the next base rate decision in February.”
