THE inflation rate has fallen to 2.6% in the year to June with experts warning that it is “a step in the right direction rather than a turning point” with “bumpy” times ahead.
The Consumer Prices Index (CPI) rose by 2.6% in the 12 months to June 2026, down from 2.8% the previous month, it has been announced.
On a monthly basis, CPI rose by 0.1% in June 2026, compared with a rise of 0.3% in June 2025.
Transport, and food and non-alcoholic beverages made the largest downward contributions to the monthly change in CPI annual rates.
Core CPI (CPI excluding energy, food, alcohol and tobacco) rose by 2.6% in the 12 months to June 2026, unchanged from the 12 months to May.
The CPI goods annual rate slowed from 2.0% to 1.7%, while the CPI services annual rate eased from 3.7% to 3.6%.
Experts said they expect inflation to remain bumpy through a combination of the ongoing tension in the Middle East and a UK economy struggling to get going.
They predict that the Bank of England will hold its base rate next week and warned mortgage holders not to expect rates to ease anytime soon.
Welcome
Matt Coulson, Founder at Rickmansworth-based Heron Financial Ltd, welcomed the rate going down.
He added: “A fall to 2.6% is welcome, and the direction of travel is the right one. The number that matters more sits underneath it. Services inflation is still 3.6%, and that is the figure the Bank of England actually watches. The temptation is to read a lower headline as a green light for cheaper mortgages, and for anyone remortgaging that hope is understandable.
“But fixed rates are priced off where markets expect rates to go, not off yesterday’s inflation print, and most of this was already anticipated. My instinct is the Bank holds again on 30 July, and that borrowers hoping for a sharp drop in fixed rates on the back of this figure may be disappointed. A step in the right direction rather than a turning point.”
Rob Mansfield, Independent Financial Advisor at Tonbridge-based Rootes Wealth Management, said we shouldn’t celebrate too soon about the numbers.
He added: “Inflation is likely to remain bumpy through a combination of the ongoing trade disruption in the Middle East and a UK economy struggling to get going. We await to see the effect of the new prime ministers’ policies. It’s boxing the Bank of England in and so there isn’t a lot of wiggle room for interest rates.”
Don’t be fooled
Craig Fish, Director at London-based Lodestone Mortgages, said he expects the Bank of England to hold its base rate next week.
He added: “This fall to 2.6% won’t translate into cheaper mortgages any time soon. Mortgage pricing is being driven by swap rates, not the headline CPI figure, and swaps have moved up sharply on the back of the Middle East conflict, already pushing mortgage rates higher.
“With the war back underway, the bigger risk is inflation picking back up later in the year, the opposite direction to what today’s figures suggest. Don’t be fooled by a good inflation print, the real story is happening in the swap markets. My expectation is the Bank of England will end up having to raise the base rate again, just not at the next meeting, they’ll hold and wait to see how the situation develops.”
Graham Nicoll, Financial Planner, Chartered FCSI at NCL Wealth Partners, said inflation is expected to “remain volatile”.
He added: “The fall to 2.6% is encouraging, but it is far too early to declare victory. Lower transport and food costs have driven much of the improvement, while core and services inflation remain stubborn, suggesting underlying pressures haven’t gone away.
“Families may welcome some relief at the checkout, commuters from lower fuel costs and pensioners from easing everyday expenses, but businesses still face higher wage and operating costs. I expect inflation to remain volatile, so people should avoid knee-jerk financial decisions and stay focused on long-term plans.”
Volatile
Ben Perks, Managing Director at Stourbridge-based Orchard Financial Advisers, said you shouldn’t expect mortgage rates to come down soon.
He added: “A fall to 2.6% makes for nice reading, but the reality is quite different. The Middle East conflict and our turbulent politics mean that borrowers are still feeling the pinch. Swap rates are creeping upward and this will mean higher mortgage pricing in the short term.”
Jamie Elvin, Director at London-based Strive Mortgages, agreed that mortgage rates aren’t guaranteed to come down due to this data.
He added: “The drop in inflation to 2.6% is encouraging, but it’s not the green light many borrowers are hoping for. The Bank of England’s focus is on persistent underlying inflation, particularly services and wage growth, rather than a single headline reading. While today’s data supports holding rates for now, it doesn’t guarantee materially cheaper mortgages.
“Fixed-rate pricing is being driven just as much by gilt yields and global events, which have moved higher amid renewed geopolitical tensions. Unless inflation continues to ease sustainably over the coming months, borrowers should expect mortgage rates to remain broadly where they are rather than fall sharply.”
Rohit Kohli, Director at Romsey-based The Mortgage Stop, said he expects inflation in July to rise again.
He added: “On paper, 2.6% looks like good news, with cheaper transport and food doing the heavy lifting. But this is old news already. Energy prices have spiked again in the last fortnight as the US and Iran conflict reignited, and that isn’t in these numbers. Inflation’s next move is more likely up than down.
“For now it’s likely to keep the Bank of England on hold, which gives borrowers a bit of stability. But with swap rates already rising, and uncertainty over the new government’s funding plans adding to the pressure, waiting to act could end up costing you more.”
Harry Goodliffe, Director at Winchester-based HTG Mortgages, said he hopes inflation continues to edge down this summer.
He added: “Inflation is easing, but the cost-of-living crisis hasn’t magically disappeared. Families are still dealing with years of price rises, higher taxes and expensive borrowing costs. The direction of travel is positive, but I’d expect the Bank of England to remain cautious. If inflation continues to edge lower over the summer, we could see further rate cuts, but they’re likely to be very gradual.”
