Business

House costs could be added to inflation

For sale signs Image copyright PA

The headline rate of inflation could be replaced by a new figure which better reflects the cost of owning a home.

The Office for National Statistics said it will be ready to make the change to its monthly announcement on price increases by the end of the year.

It would give prominence to a measure called CPIH, which has tended to show the cost of living rising faster.

The Consumer Prices index, or CPI, would be pushed down the pecking order of inflation measures.

CPI is used for the Bank of England's 2% inflation target,

It is also the figure used across Europe to show how fast prices in the shops and elsewhere have been rising or falling in different countries.

But while it reflects changes in rents, it does not show how families are affected by the rising cost of being owner-occupiers.

CPIH does not directly include house prices or mortgage payments. Instead, statisticians adjust the rate by estimating how much it would cost owners to rent their own homes.

But as a result the broader measure has been 0.3% higher for most of the last year. In January CPI was 0.3%, while CPIH was 0.6%.

Treasury resistance

The ONS has promised to make CPIH more reliable, after it was criticised for not being robust enough and lost its status as a National Statistic.

However, even if it becomes the headline inflation figure around the turn of the year, there seems little prospect that the Chancellor will direct the Bank of England to use it for the UK's inflation target any time soon.

A Treasury spokesperson told BBC News: 'CPIH does not currently meet the standards for a National Statistic. The inflation target remains unchanged.'

More on this story