Consumer price index (CPI) inflation rose to 2.9% in the 12 months to July, after falling to 2.6% in June, the Office for National Statistics (ONS) has revealed.

The jump in inflation was attributed to the increase in the Ofgem energy price cap, which rose in part because of higher wholesale energy prices following the conflict in the Middle East. This increase in gas prices was the highest since October 2022.

The ONS found that transport made the largest, partially offsetting, downward contribution to the latest inflation rise.

This update was widely anticipated across the market, with the Bank of England stating in its last Monetary Policy Committee meeting that inflation was expected to rise in the second half of the year.

Month-on-month, CPI inflation increased by 0.3%, compared to 0.1% in the previous year.

CEO at Just Mortgages and Spicerhaart, John Phillips, said that while the increase in inflation was widely anticipated, the UK has seemed to "fair reasonably well so far", as demonstrated in the latest GDP figures.

He added: "Energy is expected to be a key driver of inflation in the back end of this year, as well as rising food costs as we see the impact of this persistent hot weather.

"While it is easy to get bogged down in this macro view, it’s important that we don’t miss the moves taking place in the mortgage market – most notably rate cuts from the likes of Nationwide, Santander, HSBC and Gen H this week. There’s an argument to say more could be on the way as long-winded transaction times force lenders to think ahead to their end of year lending targets. So while it is important for us to be aware of the forces influencing our market, we shouldn’t let it dictate our conversations with potential clients – especially when there is still an ambition to buy."

Founder and CEO at Access FS, Karl Wilkinson, concluded: "The important question now is whether this is a temporary bump or the beginning of something more persistent. With wage growth also starting to cool and the labour market losing momentum, the Bank must balance the risk of inflation becoming entrenched against the risk of putting further pressure on an already weakening economy.

"For brokers, this is another reminder that clients need context rather than predictions. There is still plenty of competition among lenders and opportunities for borrowers, but we shouldn't allow another inflationary surprise to make customers sit on their hands. Advisers need to be proactive, explain what the data actually means for individual borrowers and help clients make decisions based on their own circumstances rather than trying to time the market."

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