Core CPI inflation was unchanged in December at 3.2% and the headline figure increased from 3.2% to 3.4%, the latest ONS figures show.
Seasonal factors such as higher Christmas travel costs, alongside alcohol and tobacco, made the largest upward contributions to the monthly change.
While not entirely unexpected by economists, the jump was higher than many predicted.
Industry experts now say a February Bank Rate cut is now almost entirely off the table, but remain upbeat for inflation's longer term prospects.
In a speech last week, MPC member Alan Taylor indicated that CPI inflation was still on track to hit the Bank's target level of 2% by mid-2026.
David Hollingworth, associate director at L&C Mortgages, commented: "Mortgage borrowers were buoyed by a cut to base rate in December, but today’s inflation figures may mean they will have to wait longer for another move.
The rise in the rate of inflation in December was not unexpected but is a larger bump than many anticipated. That could be enough for the Bank of England to pause any thought of another cut when they meet in February.
Fixed rates are already factoring in further reductions to base rate, but the Bank of England has been clear that those will only come when it feels confident that the downward path for inflation is sustainable."
Chris Beauchamp, chief market analyst at IG, said: "Yesterday's wage figures have been followed up by a core CPI reading that shows further signs of softness. While the headline figure was above forecasts, the less volatile core figure gives the BoE another reason to look towards additional easing in 2026. It's not enough to move the dial for February, but more such readings give the doves plenty of strength to argue for more cuts later in the year. Some of sterling's rampant strength against the dollar was trimmed yesterday, and today's inflation figures mean that further gains might be tricky, unless of course Mr Trump decides to embark on more off-the-cuff policymaking."
Nick Hale, CEO of Movera, commented: “It’s disappointing to see inflation creeping up again, as falling mortgage rates and rising property availability have kicked 2026 off to a strong start. However, it was unlikely the Bank of England would cut the base rate again in February anyway, given the slow and steady approach the Monetary Policy Committee is taking. Another cut in March or April, if the conditions are right, is looking far more likely.
“In the meantime, the opportunity to pause and rethink could be just what the sector needs. Time to take stock before what is set to be a big year for remortgaging, with or without falling interest rates. For brokers and conveyancers alike, innovation will be the key to streamlining workloads and preparing for a high-volume year.
John Phillips, CEO of Just Mortgages and Spicerhaart, added: “A jump in inflation in December may not be too much cause for concern, so long as it is a seasonal blip and not the start of inflation rising. It is hoped that once the Christmas effect works its way through, we see a return to the good progress made on easing inflation. Without another update until after the MPC decision in early February, this will be the central bank’s most recent reference point. Add in continued geopolitical and economic uncertainty, and I’d be surprised to see anything but a hold when the bank next meets in a couple of weeks.
“Nonetheless, the mortgage market has started 2026 with a spring in its step, as the pent-up demand of Q3&4 begins to release. There’s plenty for brokers to shout about at the moment with rates cut across all parts of the market and access to the most mortgage products since 2007 – particularly for first-time buyers. Lenders stand ready and willing to lend – brokers are ready to help buyers and movers navigate the market. It’s up to us to keep nurturing confidence and encouraging clients to push on with plans. We of course don’t know how the year will play out – particularly as President Trump continues to try and stake his claim to more territories and throw around more tariffs – but there’s definitely scope for more positive news in the mortgage market as the year progresses.”
