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💰 COST OF LIVING

What's Actually Driving the Cost of Living?

What the headline number actually measures, which categories move it most, and why the same inflation rate can hit two households very differently — plus live coverage as it happens, below.

2.8%
CPIH, 12 months to June 2026
5.7%
Transport inflation, same period
2
Stories tracked right now

What's actually in "the cost of living"?

"The cost of living" isn't one single number — it's shorthand for CPIH, the ONS's headline inflation measure, which tracks price changes across twelve broad spending categories (officially called COICOP divisions): things like housing and household services, food, transport, and recreation. Each category is weighted by how much an average household actually spends on it, based on national spending survey data, and the weights are updated every year to reflect changing habits.

Because it's an average across the whole country, the headline rate can genuinely diverge from what any individual household experiences — a renter with no car feels almost none of a fuel price spike, while a rural commuter with a mortgage feels both a fuel spike and a rate change at once. The category breakdown below is the more useful lens for understanding your own situation than the single headline percentage.

Breaking it down by category

The four categories that drive most month-to-month movement in the headline rate.

Housing & energy
The single biggest slice of most household budgets — rent or mortgage payments, plus gas and electricity. Mortgage costs move with the Bank of England's Bank Rate whenever a fixed deal ends and gets renewed, which is why a rate change can take months to actually reach someone's bank balance. Energy bills are capped quarterly by Ofgem based on wholesale gas and electricity prices, which is why a spike in global oil or gas prices — a war, a supply disruption — can show up in a bill a few months later even though nothing changed at home.
Food & groceries
Driven by a mix of input costs (energy for farming and transport, fertiliser, animal feed), the exchange rate for imported goods, and retailer competition. Food inflation moves differently to overall inflation — it can run hot even when the headline rate is falling, and vice versa, because it depends on its own supply chain rather than the broader economy.
Transport
One of the most volatile categories, largely because of motor fuel prices, which track global oil prices closely and can move sharply within weeks. Public transport costs (bus and rail fares) move more slowly and are often set administratively — through regulated fare caps — rather than by a live market, which is why a fuel price spike and a bus fare rise rarely happen on the same timeline.
Everyday household bills
Council tax, water, broadband, insurance, and childcare. Individually smaller than housing or food, but collectively significant — and largely made up of costs that rise on their own fixed annual schedule (e.g. April council tax and water price rises) rather than tracking the headline inflation rate day to day.

How it hits different households

The same national inflation rate lands very differently depending on your specific spending pattern.

Renter, single income
Most exposed to rent inflation directly, and has no mortgage-rate cushion or exposure either way — rent tends to move with local market conditions and landlord costs (including the landlord's own mortgage rate) rather than the Bank Rate directly.
Homeowner with a mortgage
Insulated from rate changes while on a fixed deal, then potentially hit hard the moment that deal ends and rolls onto a new rate — this is why "half of fixed-rate mortgages ending this year" is a recurring line in cost-of-living coverage: it describes a wave of households about to feel a rate change all at once, rather than gradually.
Family with children
Carries the largest exposure to food and childcare costs specifically, on top of standard housing costs — childcare in particular has historically risen faster than general inflation, and doesn't scale down even in a quiet month for the rest of the family budget.
Pensioner on a fixed income
Spends a larger-than-average share of income on energy and heating specifically (more time at home, greater vulnerability to cold), so an energy price cap change affects this group more than the headline inflation rate alone would suggest — even when their income (via the State Pension triple lock) is rising in cash terms.
This page describes how the cost of living is measured and what tends to move it — not a judgement on any government's policy response. See our Fiscal Drag, CPI vs RPI, and Real vs Nominal Growth explainers for how this connects to tax, inflation measurement, and pay.

Live coverage

Real-time stories tracked and tagged to cost of living, most recent first.