Welcome to the Money blog, Sky News’ consumer and personal finance hub. Today, we have everything you need to know about inflation rising to 3.8%, including potentially bad news for mortgages and train fares. And a London pub has started charging a 4% service charge for pulling a pint.
Wednesday 20 August 2025 14:30, UK
By Sarah Taaffe-Maguire, business and economics reporter
Rents have continued to rise faster than wages and overall inflation, official figures have shown.
The average UK private rent increased by 5.9%, to £1,343 a month, in the year to July, the Office for National Statistics said.
That’s £75 higher than 12 months ago.
It also means rent rises are steeper than the latest official 3.8% rate of inflation and 4.6% level of wage rises.
Rent rises have slowed, however, down from 6.7% a month earlier and from a record high of 9.1% in March 2024.
There are two reasons behind this slowing, said Richard Donnell, the executive director of property website Zoopla:
By Sarah Taaffe-Maguire, business and economics reporter
Borrowing costs could remain higher for longer as a result of today’s news that prices rose faster than at any point in the last 18 months in July.
While the debate rages on whether the Bank of England will respond by changing the base interest rate, the UK government has seen its long-term borrowing cost fall.
The interest rate demanded by holders of 30-year government bonds (loans issued to the state) has dropped.
While the fall is slight, down from 5.63% on Tuesday to 5.4% this morning, it’s a drop from the highest level since 1998.
The 10-year borrowing cost, which is the benchmark for state lending costs, also dropped from a recent high of 4.76% to 4.7%.
Some good news also came in an initial lift to sterling on the back of the inflation news.
One pound now buys just below $1.35 and €1.15.
A pub in London has raised eyebrows by adding a 4% service fee to all orders, even if you’re served at the bar.
The Well and Boot in Waterloo adds the discretionary service charge automatically to all punters’ food and drink bills, taking the average price of a pint up by 30p.
Looking at the pub’s menu online, a pint of Guinness costs £7.45. The 4% charge takes that to £7.75 (assuming you just ordered one).
Cocktails cost £12.50, but customers would end up paying £13 if they ordered one.
At the bottom of the menu, there is a note that says: “VAT is included in all prices. A discretionary service charge of 4% will be added to all bills.”
A sign at the bar tells customers that “100% of tips” go to staff.
What do you think? Let us know in the comments
While service charges are not unusual, they tend to apply in establishments where customers are seated and served by a waiter, and it usually means there is no expectation for a customer to leave a tip.
Customer Martin Quinn stopped at the pub, owned by Glendola Leisure, to grab a quick half pint of cider but felt he was “disadvantaged twice” after being hit by the 4% charge and forced to pay by card.
“There are two issues. One, why are they charging 4% when you’re not getting any service? You’re literally being poured the drink at the counter. I think [automatic service charges] are disgraceful,” said Quinn, a campaigner for the use of cash.
“The second is that I wanted to pay with my £20 note, but I wasn’t allowed to. I didn’t want to pay with my card, but I had to. I had no choice in the matter.”
He said he didn’t realise he had to pay the extra 4% at the time, and only noticed after taking a photo of his drink and seeing a sign in the background.
“Why should the poor punter be at the brunt of this? It’s an optional surcharge, but we don’t like complaining,” he added.
Glendola Leisure has been contacted for comment.
Do you have to pay a ’discretionary service charge’?
In government guidance to businesses, it says there is no obligation for customers to pay a voluntary service charge.
“HMRC accepts that a payment is a voluntary service charge if it is clearly presented to the customer as an entirely optional payment,” it says.
“The literature seen by the customer should reflect that and be consistent with advice given to customers by staff.”
Under the Employment (Allocation of Tips) Act 2023, which was introduced last year, all service charges, tips and gratuities must be paid directly to staff.
We asked Rupert Wesson, director of professional coaching company Debretts, what you should say if you are faced with a service charge.
“Adding a 4% service charge to every order, whether served at table or at the bar, seems a rather inelegant solution to the problem of very low margins in hospitality,” he said.
“If faced with a 4% service charge, it is important to establish if it is mandatory or optional. When presented with the bill, say ‘could I ask if the service charge is optional?’ This should be made clear before ordering, of course, but this may not be the case.
“If it is optional, you have the choice not to pay and you should not feel bad about this… It does, of course, give you the chance to pay a tip via the tips jar.”
Topshop has teased its return to the high street in a new video posted on social media.
The video reveals where people will be able to buy Topshop clothes for the first time since 2021 after its parent company went into administration.
Excited shoppers in the comments were quick to identify the setting outside Liberty’s iconic shopfront in London.
There has been weeks of speculation, with the identity of Topshop’s wholesale partner being kept under wraps.
But the news has since been confirmed to Elle UK by Liberty’s group buying and merchandising director Lydia King.
It comes days after the brand relaunched its standalone website under its own domain with a collection featuring model Cara Delevingne.
The collection also hit the catwalk at Trafalgar Square in central London last Saturday.
Less than half of savings accounts beat the 3.8% rate of inflation, meaning savers are more likely to be losing out on real returns, according to Moneyfacts.
A total of 956 out of 2,004 accounts on the market are paying above the inflation rate, the comparison site said.
These are broken down into:
“After almost a year and a half of savings growth, many savers are slipping back into earning negative real returns as inflation figures jump again,” said Caitlyn Eastell, spokesperson at Moneyfactscompare.co.uk.
“With inflation running higher than the interest savings earn, money left languishing in a low-interest account is losing its spending power – making it tougher to achieve a sense of financial resilience or save towards goals such as a car, house or comfortable retirement.
“This comes hot on the heels of the latest base rate reduction which had an almost instantaneous effect, with over a dozen savings account providers cutting variable rates within 24 hours and many more likely to tumble in the coming weeks.”
We rounded up the best rates on offer in our latest Savings Guide earlier – you can read it here…
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.
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