Inflation rose by 3.5% in the 12 months to April 2025, exceeding the originally predicted 3.3% figure and the Bank of England's 2% target. The figure also surpassed March's inflation rate of 2.6%, which had unexpectedly come in lower than forecasts.
Several household bills went up in April, so it was expected that inflation would rise month on month. However, at 3.5%, April's inflation figure is 0.2% above forecasts. It's also the highest recorded inflation rate in over a year.
With a summer base rate cut now less likely and bills going up across the board, households are feeling the pinch. Alice Haine, personal finance analyst at Bestinvest, said: "UK inflation accelerated to 3.5% in the 12 months to April - delivering a blow to households worried about a renewed squeeze on the cost of living.
"The news will be a blow for Chancellor Rachel Reeves’ quest to boost economic growth as rising inflation erodes the pound in consumer pockets, with their money not stretching as far as it did a year ago."
To put the figure into perspective, France's April inflation figure was 0.9% while Germany's was 2.2%. Across the EU, the average inflation rate was 2.4% in April.
Why did inflation rise in April?
Housing and household services, transport, and recreation were among the largest upward contributors to the monthly change in the Consumer Price Index (CPI), according to the Office for National Statistics (ONS).
Housing and household services rose to 7.8% in the 12 months to April 2025, up from 1.8% in March. Likewise, transport rose to 3.3% in April up from 1.2% in March, while the recreation and culture category rose to 3.1%, up from 2.4.%. Clothing and footwear showed the largest downward trend and partially offset the increase. Prices for clothing and footwear decreased by 0.4% year on year.
Household bill increases were part of the reason for the 7.8% increase in the housing and household category. Energy bills went up by £111 a year, while water bills saw an average increase of £123 and council tax bills increased by around £109 on average. Sarah Coles, head of personal finance at Hargreaves Lansdown, added: "Water bills rose faster than any time since 1988 – more than 35 years ago. It means the basic necessities are swallowing more of our monthly budgets than ever.
"Inflation in the cost of transport also drove inflation higher. There was the usual rise in car tax, but a change in the rules also meant the rates for some new petrol and diesel cars doubled, squeezing these drivers even harder."
National insurance and minimum wage hikes may also have been a contributing factor. Kris Hamer, director of insight at the British Retail Consortium, said: "Rising inflation was inevitable following the wave of additional costs hitting employers, and particularly retailers who employ over 3 million people across the country. For months, retailers have been warning that rising costs would lead to higher prices."
What does the rise in inflation mean for the Bank of England base rate?
Inflation is one of several factors the Monetary Police Committee considers when it decides whether to cut the base rate. In May, the MPC voted to reduce the Bank of England base rate to 4.25% from 4.50%. The vote was split; five members voted to reduce the base rate by 0.25%, while two members voted to reduce it by 0.5% and two members voted to maintain the rate. Importantly, the MPC meeting minutes reflected the fact that the committee was aware inflation was likely to rise from April onwards, expecting the rate to reach 3.5% by the third quarter of 2025 before easing again.
As such, while the rate of inflation is higher than expected, it does not necessarily mean further base rate cuts are out of the question. The next MPC meeting is on June 19, with another meeting scheduled for August 7.
Experts are divided on what the rise in inflation may mean for future base rate cuts this year. Prior to the inflation figures coming in, experts predicted an August base rate cut with 60% certainty - this has now fallen to 40%. Lindsay James, investment strategist at Quilter, added: "There are now vocal concerns coming from the Bank of England that interest rate cuts have come too soon and that inflationary pressures need to be combated.
"Chief economist Huw Pill sounded the warning earlier this week and today’s worse-than-expected inflation rate likely means further holds are imminent, especially given the strong economic growth seen in the first quarter."
But Sarah Coles, head of personal finance at Hargreaves Lansdown, does not think the latest inflation figure will necessarily put a stop to a potential base rate cut. She added: "While price rises look alarming, it won’t necessarily be setting off the alarm bells for the Bank of England. It has been predicting a spike for some time. It also expects inflation to remain relatively high for a period. Much of this has already been factored into its calculations when it decided to cut rates last month. It means these figures alone are unlikely to spark a dramatic rethink by the Bank."
Inflation isn't the only factor the MPC considers when making its decisions. Economic growth, employment levels and geopolitical factors further afield are also among some of the factors taken into account. We explain more about this process in our article on the latest base rate predictions.
How will the rise in inflation impact mortgages and savings?
A rise in inflation could point to the base rate holding steady for longer than expected. For savers, this is a double-edged sword. It means it's likely that they'll have access to better savings rates for longer. However, if inflation reaches high enough levels, this could eat away at their savings without providing a return. Given that inflation is now at 3.5%, to secure an inflation-beating return, you would need an account with an interest rate above that.
Alice Haine, personal finance analyst at Bestinvest, said: "The very best savings deals are continuing to deliver a real return for now, once inflation is factored in, but the combination of higher prices and easing savings rates may dull the outlook from here...
"With savings rates likely to ease back in the months ahead, securing a top deal now will lengthen the amount of time a saver receives an inflation-beating return."
Some of the best easy access savings accounts on offer currently come with inflation-beating rates up to 4.77% while it's possible to secure a five-year fixed rate bond with a 4.43% rate. For those looking for a tax-efficient account, Moneybox's Cash ISA offers rates of 5.71%. If you want to find out more, take a look at our roundup of the best savings accounts in the UK.
A jump in inflation won't be good news for those looking to buy their first home and secure a mortgage or indeed for those looking to re-mortgage imminently. A summer base rate cut is looking less likely as a consequence of the new inflation figures and this could affect mortgage rates. Mortgage rates have been falling slowly in the wake of two base rate cuts earlier this year, but it's unclear whether this trend will continue.
Sarah Coles of Hargreaves Lansdown said: "There’s enough uncertainty around at the moment for it to be tricky to guarantee the future path of mortgages. If you have a remortgage coming up, it’s well worth securing a rate now, and then looking again when your deal is up. If rates have fallen again, you can shop around for something better, and if the market has been caught by surprise, you’ll have locked in a decent deal."
Currently, borrowers with a 60% loan-to-value ratio can secure two-year fixed rate mortgages with rates as low as 3.86%, while those with a 90% loan-to-value ratio can find deals with rates of 4.44%. Take a look at our round-up of the best fixed-rate mortgage deals in the UK if this is of interest.
What to do if you're struggling to pay your bills
Our calculations revealed that household bills in England went up by an average of £400 per year but households all across the UK are experiencing significant increases in bills, however, there is help available if you're struggling.
If you think you're likely to fall behind on your bills, reach out to the relevant utilities supplier, council or mortgage lender to explain your situation. They will typically have policies in place to help come up with a payment plan that works for you and for them.
If you're really struggling, make sure you're claiming all the help you're entitled to by checking your eligibiliy for benefits through the website entitledto.
We also have a number of articles that may be more specific to your situation and could offer further help:
- How to save money on your energy bills
- How to save money on your water bills
- How to save money on your mortgage
- How to save money on your council tax
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