CPI and CPIH: how UK housing costs affect inflation measures

CPI and CPIH measure UK consumer price inflation, but they treat homeowners’ housing costs differently. CPIH adds an estimate of the housing service homeowners receive and Council Tax; it does not track your mortgage instalment. For a household budget, use inflation figures as context and your actual bills as the starting point.

• CPIH includes owner-occupier housing costs through estimated rental values, not mortgage repayments.
• CPI excludes those owner-occupier housing costs and Council Tax, but housing is not entirely absent.
• Household Costs Indices offer a different perspective by including mortgage interest.
• These definitions concern the UK; Canadian readers cannot assume Canadian measures work identically.

What is the difference between CPI and CPIH?

The Consumer Prices Index, or CPI, tracks changes in the prices of a broad collection of goods and services. CPIH builds on it by adding owner-occupier housing costs and Council Tax. The extra letter therefore signals a difference in coverage, not a more personalised reading of your finances.

According to the Office for National Statistics, in its bulletin published on 15 February 2023, those additions make CPIH its most comprehensive measure of consumer price inflation. This article explains that methodological distinction; it does not use that historical bulletin as evidence of today’s inflation rate.

Neither index is a list of the payments leaving one household’s bank account. Both combine categories across the economy, so the published figure can differ from the pressure felt by a tenant, a mortgage borrower or someone who owns their home outright.

Measure	Relevant housing treatment	Budgeting limitation
CPI	Includes actual rents, but excludes owner-occupier housing costs and Council Tax.	Does not describe all housing expenses.
CPIH	Adds owner-occupier housing costs using rental equivalence, plus Council Tax.	Does not measure your mortgage instalment.
Household Costs Indices	Use a payments approach that includes mortgage interest.	Household-group figures still differ from individual bills.

Why does CPIH not follow my mortgage payment?

A mortgage payment and the value of living in a home answer different questions. One concerns financing and household cash flow; the other concerns the housing service being consumed. CPIH uses the second perspective rather than treating a homeowner’s loan payment as the price of that service.

What rental equivalence means

Rental equivalence estimates the rent associated with a comparable housing service. It is a statistical valuation, not a suggestion that homeowners actually pay rent to themselves. It also does not mean the ONS has replaced your lender’s bill with a rental bill.

In housing analysis published on 26 February 2024, the ONS explains the contrast between CPIH’s imputed rents and the mortgage interest included in Household Costs Indices. That distinction helps explain why a change in a borrower’s payments need not appear in CPIH in the same way.

For someone approaching the end of a mortgage deal, the relevant budgeting information is the contract and the lender’s proposed payments. Our guide to preparing a UK budget when a fixed-rate mortgage ends explores that separate cash-flow question.

Does CPI leave out all housing expenses?

No. Excluding owner-occupier housing costs is not the same as excluding everything connected with a home. Actual rent is covered, and the ONS CPIH dataset separately identifies categories such as energy, water and maintenance alongside its additional homeowner housing component.

Confusing these categories can lead to the mistaken conclusion that a rent rise has no place in consumer inflation statistics. The more useful question is which housing cost is being measured, and whether the index uses a rental value or a payment-based approach.

Council Tax is another distinction: it is included in CPIH but not CPI. A national inflation reading cannot establish whether an individual property’s band is correct; that requires separate evidence, as explained in our guide to checking the evidence and risks of a Council Tax band challenge.

Would Household Costs Indices explain my bills better?

They can add useful context, particularly when mortgage interest is central to the question. The ONS designed Household Costs Indices to examine cost changes experienced by different household groups using a payments perspective, rather than simply reproducing CPIH with another name.

Its February 2024 analysis describes how higher mortgage interest reached borrowers as existing fixed-rate deals ended. This illustrates why the timing of a household’s refinancing matters; it is not a forecast that every borrower will experience the same change at their next renewal.

There are limits to the extra detail. The ONS explains that national price indices are used as approximations where household-group price information is unavailable, so even a group resembling yours is not an exact model of your spending.

How can I use inflation figures without misreading my budget?

Start with the question being answered. A consumer price index describes price change across a basket; a household budget describes whether income covers the payments due. Keeping those tasks separate avoids treating a statistical average as an instruction to increase every spending category equally.

1. Record the amounts on your current rent or mortgage documents, Council Tax bill and regular household bills.
2. Mark contract expiry dates and notified payment changes, rather than assuming every cost changes when inflation is published.
3. Separate confirmed bills from estimates, making uncertainty visible in your plan.
4. Review what remains for flexible spending after essential commitments, using your own records.

Lower inflation also does not automatically mean lower bills. Prices can keep rising at a slower pace, while a particular contract may change on its own timetable; for another example of the gap between averages and individual spending, see why grocery inflation can differ from your food bill.

The practical benefit of these indices is perspective, not precision about your next payment. For Canadian readers, this UK comparison is useful background, but Canadian housing measures and household obligations need their own local sources.

Informational content only, not financial advice.