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It seems that the ‘feel good’ finance news just keeps rolling in at the moment! Last week we had the news that the UK unemployment rate has dropped and this week it has been announced that the rate of inflation was down to the lowest it has been in four and a half years!
The inflation rate has been reported by the Office of National Statistics as 1.5% which has dropped from 1.8% in April. This is the sixth month in which the rate of inflation has been below the Bank of England’s target of 2%. This lessens the squeeze on wages and falls in line with the Government’s long term plan, along with the increase in people who are in employment.
This lower rate of inflation is mostly due to a drop in both flight fares and the cost of food and non-alcoholic drinks. As Easter fell late this year more flights were booked in April as this is when the school Easter holiday took place and the fares rose sharply due to this. In comparison, flight prices in May were much lower.
The price of food and non-alcoholic drinks fell by 0.6% year on year which is the largest price decline in this area in a decade. The items which reduced in price the most were bread, cereals and vegetables plus soft drinks too. This is thought to be mostly due to supermarket price wars which have been taking place as the higher priced supermarkets try to compete with the likes of Lidl and Aldi.
Economists had only predicted that the rate would drop 0.1% to 1.7% in May so this dropped has exceeded their expectation and hopefully will continue to do so!
By Sasha Davison
17th June 2014
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