UK inflation October 2026: what to watch

Inflation is the rate at which prices rise. For people repaying debt it matters in two ways: it squeezes the money left over after bills, and it shapes the Bank of England’s decisions on Bank Rate, which feed into what new borrowing costs. This post sets out the latest official figure, what the official forecasters expect, and how to think about overpaying a loan when prices are rising. It is not advice, and LoanCalc Lab is not a lender or a broker.

The latest official figure

According to the ONS bulletin for September 2026, published on 21 October 2026:

• The Consumer Prices Index (CPI) rose by 3.5% in the 12 months to September 2026, up from 3.1% in August. CPI is the measure used for the government’s 2% inflation target.
• CPIH, which adds owner occupiers’ housing costs and Council Tax, rose by 3.6%, up from 3.3%.
• Core CPI, which leaves out energy, food, alcohol and tobacco, rose by 2.8%, up from 2.6%. Services prices rose by 3.7% and goods prices by 3.2%.
• Transport, particularly motor fuels, made the largest upward contribution. The ONS reported average petrol at 169.5p a litre and diesel at 192.5p, the highest since 2022. Food and non-alcoholic drink inflation was 1.3%, unchanged from August.

CPI was 3.1% in August, more than one percentage point above the 2% target, which triggered an exchange of open letters between the Governor and the Chancellor, as the September MPC minutes record. The October 2026 release is confirmed for Wednesday 18 November 2026 at 7am, and the November figures follow on 16 December.

What the official forecasts say

The OBR’s Economic and fiscal outlook, published with Budget 2026 on 28 October, expects higher energy prices to keep CPI inflation above the 2% target in 2026 and 2027. In its central forecast, CPI inflation averages around 3.1% in 2026 and 3.4% in 2027, with a quarterly peak of 3.8% in early 2027, before falling back to target halfway through 2028 as energy prices fall in line with market pricing.

The OBR is clear that this is uncertain. Based on its past forecast errors, it puts roughly a one-in-five chance on CPI inflation in 2027 being above 4½% and a similar chance of it being below 2½%. The Bank of England’s September minutes made a similar point: the near-term outlook is very sensitive to energy prices. A forecast is a central estimate, not a promise, and the figure on 18 November may come in above or below what anyone expects.

Why inflation matters for borrowers

Fixed payments, rising bills. Most personal loans have a fixed monthly payment. Inflation does not change that payment, but it raises the cost of everything else, so the same payment takes up more of a stretched budget. That is the most direct way inflation affects people with existing loans.

Bank Rate and new borrowing. The Bank of England sets Bank Rate to bring inflation back to 2%. Higher-than-expected inflation can make it more likely that rates stay higher for longer, and that tends to feed into new loan quotes and variable rates on cards and overdrafts. Our Bank Rate preview covers the 5 November decision and what it would and would not change.

Savings rates. Inflation also affects what cash savings earn. The Bank of England’s Money and Credit release put the average effective rate on new household time deposits at 4.42% in September 2026, against 9.85% on new personal loans. Those are averages, not offers, but the gap is one reason why the overpaying-versus-saving question comes up so often.

Overpaying versus keeping a cash buffer

When prices rise, two sensible goals pull in different directions. Paying debt down faster cuts the interest you pay. Keeping cash to hand protects you if a bill jumps or income falls. Neither is right for everyone, so here is the arithmetic for one illustrative loan, followed by the questions worth asking.

Take a loan of £8,000 over 48 months at 9.85%, with no fees. We chose 9.85% because it matches the Bank of England’s September average for new personal loans; your own rate will differ. Our extra payment calculator gives:

• No overpayment: £202.32 a month for 48 months, with total interest of £1,712.
• £100 a month extra from the start: the loan clears in 30 months instead of 48, and total interest falls to £1,056, a saving of £655.
• A single £1,000 overpayment in month one: the loan clears in 41 months, and total interest falls to £1,279, a saving of £432.

These figures assume the lender uses each overpayment to shorten the term and that there are no early repayment charges. MoneyHelper notes that lenders must let you make partial early repayments, but a charge can apply if you repay more than £8,000 in a year. It is capped at 1% of the amount repaid early, or 0.5% in the final year of the loan. Our early settlement guide explains how lenders work this out.

A cash buffer has a value that a calculator cannot show. Money you have overpaid is usually gone: you cannot take it back if the boiler fails next month, and borrowing again on a card at around the average card rate would cost far more than the loan you paid down. Questions worth asking before overpaying:

• Could you cover an unexpected bill or a month of lower income without new borrowing?
• Do you have any higher-rate debt, such as a card or overdraft? That usually costs more to carry than a personal loan; see our borrowing costs post.
• Does your lender apply overpayments to shorten the term or to lower the payment?
• Is your income or your household bill likely to change in the next few months?

Our guide to overpaying a personal loan versus saving sets out the trade-off in more detail. Nothing here is a recommendation to overpay or to save.

What we will add on 18 November

• the CPI, CPIH and core CPI rates for the 12 months to October 2026, from the ONS bulletin;
• the main categories that pushed inflation up or down;
• how the figure compares with the OBR forecast path above, without reading more into it than the data allow;
• anything relevant from the Bank of England’s 5 November Monetary Policy Report.

Related news

• Bank Rate decision: November 2026 preview — the decision due on 5 November.
• UK borrowing costs: Money and Credit data — what households pay on cards and loans.
• UK Budget: what it means for borrowers — what Budget 2026 changed for people with debts.

Sources

• ONS — Consumer price inflation, UK: September 2026
• ONS — Release calendar: Consumer price inflation, UK: October 2026
• Office for Budget Responsibility — Economic and fiscal outlook, October 2026
• Bank of England — Monetary Policy Summary and minutes, September 2026
• Bank of England — Money and Credit, September 2026
• MoneyHelper — Personal loans (product norms only)

Disclaimer

This post and all example figures are illustrative only. They are not personalised financial advice, not a credit offer, not an inflation forecast and not a recommendation to borrow, overpay, save, refinance or keep any existing credit. LoanCalc Lab is not a lender or a broker. Rates, fees and terms vary by product and lender. Always read your lender’s disclosure and regulated pre-contract information for your circumstances.