Welcome to the Money blog, Sky News’ consumer and personal finance hub. This morning we’re focusing on inflation data for July, which showed a rise to 3.8%.
Wednesday 20 August 2025 09:45, UK
Santander is axing a popular account this week, affecting hundreds of thousands of customers.
From tomorrow, the bank will close its 123 Lite current account, which has not been available to new customers since 2022.
The account offered 3% cashback on household bills for a £2 fee, with the rewards programme ending tomorrow as well.
Anyone affected by the closure will be automatically switched over to Santander’s Everyday Current Account.
The good news is that there’s no monthly fee involved with that account, though it doesn’t offer cashback.
Santander has said customers also have the option to close or switch their account without charge.
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Moving away from inflation… The average floor area of a flat or detached home in England has shrunk over the past decade, according to new analysis.
Research from Nationwide Building Society also found that bungalows, terraced homes and semi-detached properties grew in size over the same period.
Andrew Harvey, senior economist at Nationwide, said the average floor area in a typical property has increased from 95.3 square metres to 96.2 square metres in the last decade.
“The largest increase has been in terraced houses, where the average floor area is 3.6% bigger than in 2013,” he said.
“But the average size of a flat, the smallest property type, is now 1.7% smaller than 10 years ago at 60.3 square metres.”
Homebuyers have been warned that mortgage rate cuts could slow down or go into reverse entirely given today’s inflation data.
In recent months, mortgage rates have started to creep down, with two-year fixed rates hitting an average of less than 5% for the first time since 2022 last week.
But several mortgage experts say this progress could be stalled.
David Hollingworth, associate director at L&C Mortgages, said: “Mortgage borrowers have been enjoying a market where rates have been dropping. Fixed rates have been pricing in the recent and future cuts, so have been edging down with a host of deals now below 4%.
“Those reductions have tended to come in small increments, but we could see that slow further or even reverse in some cases if the market reacts badly to the threat of higher inflation than was previously expected.
“Borrowers holding out for more cuts may want to keep close tabs on mortgage rates. It’s far from doom and gloom but securing a rate now will protect against any turnaround but still allow a further review before completion, if there are further improvements.”
Peter Stimson, director of mortgages at lender MPowered, went further, saying the jump in inflation would “slam the door” on the chance of any meaningful reductions in the coming weeks.
“Today’s painful jump in inflation means that base rate cut may now be pushed back into 2026, and as a result we are unlikely to see any further rate cuts from lenders in the immediate term,” he warned.
“Competition between lenders is intense but mortgage rates may well have fallen as far as they can for now. They may even creep up over the next month or so as lenders recalibrate in response to rising swap rates.”
Despite inflation coming in higher than expected, analysts at Capital Economics still believe the Bank of England will cut the base rate in November – but it will be a “close call”.
When inflation is high, the Bank tends to hold or increase interest rates to encourage people to save rather than spend, which can help bring it down.
The Bank and the government have an inflation target of 2%, much lower than the rate of 3.8%.
However, July’s inflation rise was widely anticipated, partly due to the “Oasis bump” caused by fans flocking to cities for the band’s reunion tour and higher airfares in the school holidays.
“While the rise in CPI inflation from 3.6% in June to 3.8% will fuel speculation that further interest rate cuts are off the agenda this year, the Bank of England expected such a rise, so we doubt the figures will move the dial too much on the outlook for interest rates,” said Ruth Gregory, deputy chief UK economist at Capital Economics.
“A rate cut in November remains our base case, although the decision will be a close call and will depend on the data released over the next few months.
“The risk is that inflation expectations and wage growth rise further and the next move down in rates does not happen until next year.”
She explained that “erratic factors” had pushed inflation up, so the Bank would be less concerned as these would be reversed in the coming months.
Instead, it will be worried about today’s food inflation figures, which show it has risen for the fourth month in a row to 4.9%.
The next base rate decision is in mid-September.
The UK continues to have the highest rate of inflation in the G7.
The US, Canada, France, Italy and Germany all recorded inflation rates lower than 3.8% in July.
We are still waiting for Japan’s latest data, which is why it’s not included in the table below, but in June, prices rose at a rate of 3.3%.
We’ve also included the inflation rate in the eurozone – the countries that use the euro – for comparison.
A “hefty” increase in airfares was the main driver of inflation in July, Office for National Statistics data shows.
A rise in restaurant and hotel prices also played a significant role, followed by the fourth consecutive monthly rise in food costs.
Food inflation is now at the highest rate since February 2024 – and as Paul Kelso explains in our 7.12am post, higher labour costs due to the employer national insurance hike are partly to blame.
ONS chief economist Grant Fitzner said air travel prices recorded their largest July rise since 2001, likely due to the timing of this year’s school holidays.
“The price of petrol and diesel also increased this month, compared with a drop this time last year,” he added.
“Food price inflation continues to climb, with items such as coffee, fresh orange juice, meat and chocolate seeing the biggest rises.”
We’ve just heard from the Conservatives, with shadow chancellor Sir Mel Stride saying: “This morning’s news that inflation has risen even higher than the 2% target is deeply worrying for families.
“Labour’s choices to tax jobs and ramp up borrowing are pushing up costs and stoking inflation – making everyday essentials more expensive.
“And with leading economists warning that the chancellor has blown a colossal blackhole in the public finances, families and businesses are bracing for yet more pain come the autumn budget.
“Families are paying the price for Rachel Reeves’s economic mismanagement. Britain can’t afford Labour.”
Rising food prices have been partly blamed on higher labour costs, with employers facing an uptick in national insurance contributions.
Chancellor Rachel Reeves has been quick off the blocks with her response to those (slightly) higher-than-expected inflation figures.
Her words recognise the challenges Britons are facing amid the spike in the cost of living – and attempt to show her government is working on it.
“We have taken the decisions needed to stabilise the public finances, and we’re a long way from the double-digit inflation we saw under the previous government, but there’s more to do to ease the cost of living,”she says.
“That’s why we’ve raised the minimum wage, extended the £3 bus fare cap, expanded free school meals to over half a million more children, and are rolling out free breakfast clubs for every child in the country. Through our Plan for Change we’re going further and faster to put more money in people’s pockets.”
Today’s inflation figures are proof of what the Bank of England has been worried about, our business and economics correspondent Paul Kelso says.
“What we’re seeing now is what the Bank has always been worried about, which is that sticky inflation will become embedded in the economy,” he said.
“We were in a period where it felt like there would be a Bank of England base rate cut every quarter. That feels like it’s on pause for the moment while they work out where the economy is going.”
He said the uptick in inflation would be “unwelcome” despite it being anticipated by the Bank
“The Bank is expecting inflation to peak at 4% this year and then fall back in the year that follows – but that’s a small consolation while prices keep going up,” Kelso says.
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