MorganAsh comments on ONS consumer price inflation

Following the release of the latest ONS consumer price inflation figures, here is a comment from MorganAsh.

MorganAsh has developed the MorganAsh Resilience System (MARS) to help brokers, advisers and financial services firms better manage and evaluate consumer vulnerability and comply with Consumer Duty.

Andrew Gething, managing director of MorganAsh said: “Following successive shocks, it’s positive to see inflation ease beyond expectations to its lowest level in more than a year. The hope is this news may allow mortgage lenders to reduce rates and budge even slightly on their fixed-rate pricing. This will be most welcome among those households set to remortgage in the near future.
“But beyond the lower headline inflation achieving the Bank of England’s forecast of 7.9%, we cannot escape the fact that it still remains well above its overall target of 2%. UK grocery inflation did ease for a third consecutive month in June – a trend which has continued into July, but along with sticky core inflation, still remains painfully high. As is such, the good news may still not be good enough and may influence the Bank of England ahead of the next MPC meeting in August.

“The aim of increasing bank rates is to curb spending. For mortgages holders, this will be most painful for around one million on variable rates and less of an issue for those still on fixed rates. Meanwhile, the triple lock means pensioners are receiving increases in the 10% range. You have to ask is increasing pain on one million going to translate into bringing down spending on the rest of the country. Sustained inflationary pressures are a result of an increase in the base costs of food and commodities due to the Ukraine war. This is not driven by increased consumer spending so trying to drive down consumer spending may not be an effective means to reduce inflation.

“Nonetheless, high inflation keeps the pressure on the most vulnerable of households. With scope for further interest rate rises and stubborn prices, this segment of society has the potential to keep increasing in size. With Consumer Duty coming into force in less than two weeks, firms across financial services have a greater responsibility to support vulnerable consumers. Without a consistent approach to monitoring vulnerability, it will be much harder for firms to be alive to the challenges and to meet the FCA’s new rules.”

Published: 19 July 2023