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Britain’s Richest Hit Most by Inflation and High Interest Rates - BLOOMBERG

MAY 30, 2024

Tom ReesBloomberg News

Shoppers walk along New Bond Street in central London. Photographer: Jose Sarmento Matos/Bloomberg

Shoppers walk along New Bond Street in central London. Photographer: Jose Sarmento Matos/Bloomberg , Bloomberg

(Bloomberg) -- Britain’s richest households are bearing the brunt of stickier inflation and high interest rates, a reversal of earlier trends when the poorest was squeezed hardest.

The most wealthy 10th of households suffered higher inflation of 5% in March, well above 3.9% rate for the poorest 10%, according to data released Thursday by the Office for National Statistics.

The figures show how the sharp cooling in energy and food inflation has alleviated the pressure on the finances of the worst off in Britain. The poorest spend a disproportionate amount of their incomes on these bills and were therefore hit harder when inflation soared following Russia’s invasion of Ukraine. 

Easing pressure on finances may lift the mood of consumers in poorer parts of the UK, many of whom backed the Conservatives in the 2019 election. Many “red wall” seats in the north of England are expected to switch back to Labour at the election on July 4 after a squeeze on living standards since the 2019 vote. 

Meanwhile, the Bank of England’s struggle to stamp out sticky services inflation is squeezing high income households by more. Rapid restaurant and hotel price rises and high mortgage rates mean the richest are now suffering more from persistent inflationary pressures.

The ONS figures use their Household Costs Indices, which are different from the benchmark Consumer Prices Index as they include changes in mortgage interest rates and other costs from buying property.

The figures therefore lay bare the impact of 14 back-to-back interest rate rises by the BOE for mortgage holders. Inflation was at 5.5% for this group after many refinanced at much higher mortgage rates, compared to just 3.3% for those who own outright and 4.6% for private renters.

The retired also had a much lower inflation rate than other groups at 3.4%.


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