Fuel and travel costs are pushing prices up again
Thursday 5 November 2026
Inflation has risen to 3.1%, meaning everyday spending is getting more expensive just as household budgets are already under pressure.
Real interest rate
An interest rate adjusted for the change in prices, showing what borrowing or saving costs in purchasing power.
What it means
A stated interest rate tells you how much the amount of money grows or what borrowing costs in pounds. A real interest rate allows for inflation, which reduces what each pound can buy. For a quick estimate, subtract inflation from the stated interest rate; the exact calculation is slightly different. For a loan or saving decision about the future, people use expected inflation, which may differ from what actually happens. Tax, fees and the particular prices you face can change your own result.
Example
Suppose £100 in savings earns 5% over a year, becoming £105, and the things you buy also cost 5% more. You have more pounds, but your savings buy the same amount as before, so the real return is 0% before tax and fees.
Why it matters
A positive interest rate can still leave a saver worse off in buying power if prices rise faster; borrowers also need to distinguish money payments from their inflation-adjusted cost.
Also known as
inflation-adjusted interest rate
Related terms
-
Bank Rate
The main interest rate set by the Bank of England, which influences rates on borrowing and saving.
Read more -
Inflation
A general rise in prices over time.
Read more -
Purchasing power
How much you can buy with a given amount of money.
Read more -
Real terms
A way of comparing money in different years after allowing for changes in prices.
Read more
Keep in the loop
News
Highlights from about the UK economy, the UK government and the UK public sector.
Mortgage relief will have to wait a little longer
Wednesday 4 November 2026
Interest rates are staying at 3.75%, so households with mortgages and other borrowing may have to wait longer for costs to come down.
Energy bills are going up as winter approaches
Wednesday 4 November 2026
A higher energy price cap means many households will be paying more to heat and power their homes during the colder months.
Guides and insights
Analysis
Clear, accessible analysis of the economic issues shaping everyday life
Living standards
What does a day’s work buy?
Comparing the cost of everyday life across generations, from bread and beer to buying a home.
Food & prices
The journey behind your grocery bill
How farming, energy, transport and supermarket competition shape the price on the shelf.
Prices & inflation
Inflation is falling. What happens next?
What slower price rises mean for wages, purchasing power and economic recovery.
Shared prosperity
What would shared prosperity look like?
Beyond GDP: how we could measure economic success through security, opportunity and living standards.
Let's work together
Get in touch
We're looking to work with individuals and organisations who can contribute funding, expertise, data, technology, or strategic connections to help build better economic tools and research.