UK inflation slowed more than expected to 3.2% in November

With inflation at an eight-month low, will the Bank of England cut interest rates tomorrow?

UK inflation fell by a bigger-than-anticipated margin to 3.2% in the year to November, according to data released today by the Office for National Statistics (ONS). This continues the downwards trend seen in the previous month (when inflation slowed from 3.8% to 3.6%) and means costs of goods and services are rising at their lowest level in eight months.

Alongside a small jump in unemployment and the economy contracting in October, these latest figures fuel expectations for the Bank of England to cut interest rates tomorrow.

What caused inflation to fall?

Falling inflation was largely caused by lower food prices which, Grant Fitzner, Chief Economist at the ONS, said traditionally rise at this time of year. Having previously increased at 4.9% in the year to October, the cost of food and non-alcoholic beverages rose at a slightly slower rate of 4.2% in November. Meanwhile, prices dropped by 0.2% on a monthly basis.

In particular, the cost of cakes, biscuits and breakfast cereals all declined, while smaller downwards contributions were made by dairy products, chocolate and confectionery.

Elsewhere, the rate at which prices of alcohol and tobacco are rising eased from 5.9% in the year to October to 4.0% in November – possibly a result of when changes to tobacco duty came into effect this year and last year. The division also recorded a 0.4% monthly drop which helped to drive inflation down.

Savings remain under threat

While there are currently 1,512 savings accounts that can beat inflation and see savers’ money grow in real terms, this number could shrink if a base rate cut is on the cards tomorrow - so savers may need to act fast.

“This year inflation has averaged 4.01% and the Moneyfacts Average Savings Rate at 3.50%, meaning cash savings have failed to keep pace. For someone with £10,000, this equates to being around £50 worse off in real terms,” said Caitlyn Eastell, Spokesperson at Moneyfactscompare.co.uk.

However, with the Office for Budget Responsibility (OBR) forecasting inflation to average at around 2.5% in 2026, she explained that savers could be £100 better off in real terms if savings rates were to hold steady.

“It’s as crucial as ever that savers now pay closer attention to how to get their money working its hardest,” said Eastell.

“Inflation remains one of the biggest threats, however, fiscal drag also plays a major role. The income tax threshold freeze could haul millions of consumers into higher tax brackets and subsequently receiving a surprise tax bill as their personal savings allowance is halved from £1,000 to £500. Although the interest rates offered on cash ISAs are typically lower than their non-ISA counterparts, they may be more favourable in the long run as all interest earned is tax-free,” she added.

But, with the Moneyfacts Savings Trends Index 2025 finding that one in four savers have never switched accounts and as loyalty often goes unrewarded, Eastell offered the reminder that “the markets are most generous to those who proactively search for the highest-paying deals”.

Hope for mortgage borrowers

In contrast, mortgage borrowers may be optimistic that today’s figures prompt the Bank of England to lower interest rates tomorrow in the hopes this brings down lending costs.

“Although mortgage rates remain significantly higher than the ultra-low levels seen in previous years, lenders have been drip feeding cuts as inflation eases, fuelling speculation for a base rate cut. The most recent GDP figures only add fuel to the fire,” said Eastell.

“In December 2023 the average two-year fixed rate was 6.04% and the ‘typical’ borrower could expect a monthly repayment of around £1,600. Remortgage customers could now see their repayments drop by almost £180, which will ease a significant burden. However, for first-time buyers higher borrowing costs continue to limit their purchasing power,” she added.

Should I speak to a mortgage broker?

Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage, as well as helping you access exclusive products and rates that aren’t available to the public. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice.

Speak to an award-winning mortgage broker today