Renters, those with a mortgage and workers have suffered from steeper inflation compared with those who own their home outright and retirees, highlighting that younger generations have had a tougher cost of living crisis.
According to calculations by the Office for National Statistics, private renters and mortgagors experienced inflation rates of 3.2 per cent and 3.7 per cent respectively in the year to June.
This compared with an annual inflation rate of 1.3 per cent for outright owner occupiers, the ONS said, adding that retired households also had the lowest inflation rate of any group the statistics agency examined at 1.2 per cent. Workers, in contrast, experienced an inflation rate of 2.9 per cent.
The ONS said: “Mortgage interest payments contributed 2 percentage points to the annual rate for mortgagor households. Similarly, private rental costs contributed 2.2 percentage points to the annual rate for private rental households.”
The figures showed that rising prices and interest rates have exacerbated the inequality between generations. According to the latest English housing survey, 70 per cent of 16-to-24-year-olds and 40 per cent of 25-to-34-year-olds were renting. This type of housing tenure was the least likely among those aged 55 and over, with owner occupation the most likely at about 75 per cent, although this group included owners still with a mortgage.
The Bank of England lifted the base rate to 5.25 per cent, a 16-year high, from a record low of 0.1 per cent before cutting it by a quarter point this month. At its peak, annual rental inflation hit a record high of 9.2 per cent in March and has since eased to 8.6 per cent.
Liz Emerson, co-founder and chief executive of the Intergenerational Foundation, a think tank focused on narrowing inequality between age groups, said: “As these figures make plain, younger households are feeling the effects of higher inflation more than older generations, largely driven by sky-high housing costs.”
She added that the ONS’s data demonstrated that calls for the Labour government to reinstate the universality of the winter fuel allowance “are poorly guided and intergenerationally unfair”.
Last month Rachel Reeves, the chancellor, made the winter fuel allowance, a government transfer to the elderly to help with energy bills, means-tested and available to pensioners eligible for benefits. The previous scheme had been criticised for handing out payments to wealthy pensioners, although the changes are set to cut off a key lifeline for middle-income retirees.
Sam Tims, senior economist at the New Economics Foundation, a left-leaning think tank, said that private renters had been the victim of Britain’s inability to build “enough high-quality housing, particularly social homes”.
He added: “Problems in the housing market have been compounded by high interest rates that impact people with a mortgage far more than those who own their home outright.”
A sharp reduction in food and energy price growth has drastically reduced the rate of inflation experienced by poorer households. The ONS said that the inflation rate for the lowest income group in June was 1.7 per cent, the smallest of all, compared with 10 per cent in June last year, which was the highest rate at the time. The richest households experienced an inflation rate of 3.3 per cent, probably due to higher mortgage repayments.
