Renters Suffer Inflation More than Homeowners

Written by Sam Jones on 17 July 2013.

It seems that homeowners experience a slower rate of inflation than renters because of cheap mortgage rates, according to the latest Office for National Statistics report.

The latest figures shows those owning their own property saw 0.2 per cent less inflation than the rest of the economy.

The consumer prices index increased to 2.9 per cent in the 12 months June, up from 2.7 per cent in May.

The ONS reports the consumer prices index grew on the back of increases in the price of petrol, clothing and footwear. The key price falls over the year were in air travel and food.

The CPI inflation rate is slightly above the figures seen over the previous 12 months but below the levels reached between the start of 2010 and spring 2012.

However, there is a new measure from the ONS which takes into account owner occupiers' housing costs.

The CPIH index increased as well to 2.7 per cent in the year to June, compare to 2.5 per cent in May. The ONS currently classifies CPIH as an experimental statistic.

The slower growth in CPIH than CPI is principally down to owner occupiers’ housing costs increasing more slowly than overall inflation for other consumer goods and services.

The difference between owner occupiers' costs and the rest of the economy can be attributed to falling mortgages rates.

The statistically significant 0.2 per cent difference shows the crucial importance of getting the right mortgage deal.

It can have a major impact on your finances and by using a broker to scour the market you could reduce the damaging impact of high inflation even further.

Property prices

Inflation eats away at the value of your cash so you should always try to make an investment or saving product which outstrips inflation or it will fall in value.

With inflation at 2.9 per cent there are currently no savings products available in the UK which will outstrip inflation.

It means there are no super low-risk places to put your money that will not lose value over time.

One of the best ways to keep pace with inflation is the property market as house prices are predicted to keep apace with inflation in numerous surveys.

A recent Ernst & Young Item Club report predicts prices will rise by a massive 6.3 per cent in 2015, more than double the current rate of inflation.

In an uncertain investment environment where savings rates lose more and the stock market is tumultuous property represents a sound investment.

Safe as houses

It means that if you are looking to buy your first home by pumping your money into a home, particularly in London and the south east, you could earn more than a savings account through price growth.

If you are looking to become a buy-to-let landlord the average rental yield is hovering around 6 per cent, according to Paragon Mortgages.

Whether a landlord or first-time buyer property represents a sound investment in an era of low returns, uncertainty and low interest rates.

Furthermore, cheap mortgage rates means owning your home can help you outstrip inflation see your costs rise more slowly.

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