Fuel-driven CPI surge to highest since October 2025 puts pressure on borrowers ahead of November rate decision
UK inflation accelerated sharply in September, with the Consumer Prices Index (CPI) rising to 3.5% in the 12 months to September, up from 3.1% the previous month and the highest rate recorded since October 2025, according to data published by the Office for National Statistics (ONS).
The figure came in higher than most forecasters had anticipated, driven primarily by a surge in motor fuel prices, and has strengthened expectations of a Bank of England base rate rise before the year is out.
The ONS data showed that petrol prices rose by 8.2 pence per litre between August and September, reaching 169.5p – the highest level since August 2022. Diesel climbed by 10.7p per litre over the same period to 192.5p, its highest since July 2022. Overall motor fuel prices rose by 29.8% in the 12 months to September, up from 23% the previous month. Core CPI, which strips out energy, food, alcohol and tobacco, rose from 2.6% to 2.8%, while the CPI all-services index climbed from 3.4% to 3.7%.
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What it means for mortgage rates
Brokers and their clients find themselves at a delicate moment. Swap rates have been volatile in recent weeks, and today's data is unlikely to bring any relief to borrowers already navigating a market where lenders have been moving rates in both directions, with around 1.8 million fixed-rate mortgages due to expire in 2026 – many taken out when rates were at historic lows.
David Hollingworth (pictured top right), associate director at L&C Mortgages, said the scale of the rise would cement market expectations for a rate increase at the Monetary Policy Committee's (MPC) 5 November meeting. "It was expected that the rate of inflation for September would rise but today's figure of 3.5% is higher than most anticipated, driven by rising fuel prices,” he said. “That will do nothing to ease the recent upward pressure on mortgage rates and is likely to cement expectation of a base rate rise to come in November. The Bank of England has already stated that the longer that energy prices remain high, the greater the risk of persistent inflation."
On the question of timing, he said clients on expiring deals should not wait. "Those coming to the end of a current fixed deal will not only face higher rates but also a more volatile market where deals can come and go quickly. Securing a rate earlier to protect against further increases and then reviewing again before completion has become the name of the game."
A mixed picture with eyes on the Budget
September's reading marks two full years since inflation was last at or below the Bank of England's 2% target – a milestone that makes further tightening increasingly hard to avoid. The Bank of England held the base rate at 3.75% for the sixth consecutive time in September, but with chancellor John Healey’s Budget on 28 October and the MPC decision the following week, today's data has materially shifted the odds on what happens next.
Mark Harris (pictured top left), chief executive of SPF Private Clients, said the figures made a rate rise before Christmas look increasingly likely. "With the consumer prices index rising to 3.5% in September, marking two years since inflation was last below the Bank of England's 2% target, the chance of an interest rate rise before the end of the year looks increasingly likely,” he said. “Swap rates have been volatile in recent weeks, resulting in mixed pricing movements by lenders with some trimming rates while others increase pricing. The average shelf-life of products has also contracted as lenders try to deal with changing funding costs. Borrowers can protect themselves as much as possible by speaking to a whole-of-market broker and locking into a new product sooner rather than later."
What brokers are watching
John Phillips (pictured top middle), chief executive of Just Mortgages and Spicerhaart, said the September figure reflected a renewed wave of cost pressures visible to consumers long before today's official release.
"Fuel forecourt price boards have provided consumers with a very visible reminder of inflationary pressures in recent weeks,” he said. “The rise in CPI inflation to 3.5% reflects these renewed cost pressures, particularly around fuel and energy, against a continued backdrop of geopolitical uncertainty. The wider economic picture though remains mixed with the latest GDP figures showing the UK economy continuing to grow, suggesting that there is still some resilience despite the pressures facing households and businesses. All eyes are now on next week's Budget, with both borrowers and lenders looking for greater clarity on the government's plans. As ever, expert advice remains critical in helping clients navigate an ever-changing market."
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