Prices, pay and house prices
What inflation means, whether pay keeps up, and what has happened to the cost of homes, with the calculations to check each claim.
Suits: Economics, maths and statistics, citizenship, PSHE. Levels: ages 11–14, 14–16 and 16+. Rebuilt every night from the latest figures.
August 2026. A year earlier 3.8%.
July 2026, all employees, before tax.
A week, UK median, 2025.
July 2026.
Words to know
- Inflation
- How much higher prices are than a year earlier.
- CPI
- Consumer Prices Index: the official measure of inflation, from a basket of what households buy.
- Real terms
- Adjusted for inflation, so you can compare what money buys.
- Median
- The middle value when everything is put in order.
- Mean
- The total divided by the number of items: what most people call the average.
- Percentage points
- The difference between two percentages.
Charts
% a year. The yearly rate of inflation, by month. September 2016 to August 2026.
Source: ONS, Consumer Price Index
% change on the same month a year earlier. Growth in average weekly earnings on a year earlier. August 2016 to July 2026.
Source: ONS, Average Weekly Earnings
£. The average UK house price, by month. August 2016 to July 2026.
Source: HM Land Registry, UK House Price Index
Inflation and earnings, last twelve months
| Month | Inflation (yearly rate) | Average weekly earnings |
|---|---|---|
| August 2026 | 3.1% | – |
| July 2026 | 2.9% | £756 |
| June 2026 | 2.6% | £756 |
| May 2026 | 2.8% | £751 |
| April 2026 | 2.8% | £753 |
| March 2026 | 3.3% | £756 |
| February 2026 | 3.0% | £746 |
| January 2026 | 3.0% | £743 |
| December 2025 | 3.4% | £738 |
| November 2025 | 3.2% | £739 |
| October 2025 | 3.6% | £739 |
| September 2025 | 3.8% | £734 |
Earnings are in cash terms, before tax.
Questions
What was the inflation rate in August 2026?
Answer. 3.1% a year: prices were 3.1% higher than a year before.
A year earlier (August 2025) the rate was 3.8%. Is the rate now higher or lower? By how many percentage points?
Answer. Lower by 0.7 percentage points (3.1 − 3.8).
If the inflation rate falls from 4% to 3%, are prices falling? Explain.
Answer. No. Prices are still rising, only more slowly. Prices would fall only if the rate went below zero (deflation).
What was the average UK house price in July 2026?
Answer. £272,611.
What is the typical full-time weekly pay in 2025?
Answer. £767 a week (the middle full-time worker, before tax).
Prices rose 3.1% over the year. A basket of shopping cost £100 a year ago. What does it cost now?
Answer. £100 × 1.031 = £103.10.
The highest rate in the last twelve months was 3.8% (August 2025) and the lowest 2.6% (June 2026). What is the range?
Answer. 3.8 − 2.6 = 1.2 percentage points.
The average house price was £198,169 in July 2016 and £272,611 in July 2026. Work out the percentage increase.
Answer. (272,611 − 198,169) ÷ 198,169 × 100 = 38%.
Average weekly earnings and typical full-time pay are different numbers (£756 and £767). Why might two ‘pay’ figures differ?
Answer. They measure different things. Average weekly earnings is a mean of all employees (including part-time, with bonuses), from a monthly business survey. Typical full-time pay is the median (middle) of full-time workers, from a yearly survey. A few high earners pull a mean up.
Earnings grew 3.7% in the year to July 2026 and prices 2.9% over the same year. Work out the real change in earnings.
Answer. (1 + 0.037) ÷ (1 + 0.029) − 1 = +0.8%. Pay rose faster than prices. (A quick estimate is +0.8 points.)
A newspaper says ‘wages are rising faster than inflation, so everyone is better off’. Give two reasons this might not be true.
Answer. Averages hide differences: some people’s pay rose less, and their own prices (rent, energy, travel) may have risen more than the average. Pay is before tax, benefits and housing costs; the average is dragged up by high earners; one year is not a trend.
Why might a house price index be ‘adjusted for the mix of homes sold’?
Answer. If more expensive homes happen to be sold in one month, the raw average would jump without any price rising. Adjusting for the mix compares like with like.
The Consumer Prices Index was 139.3 in August 2025 and 143.6 in August 2026. Show that the yearly rate is about 3.1%.
Answer. (143.6 − 139.3) ÷ 139.3 × 100 = 3.1%. Index figures are rounded, so this matches 3.1% closely.
Ideas for discussion
- Is inflation the same for everyone? Who might be hit harder, and why?
- If you were negotiating pay, which figure would you quote: average, median or the inflation rate? Why?
- Would you rather prices rose slowly or stayed the same? What are the trade-offs?
Answer sheet: Prices, pay and house prices
Find. 3.1% a year: prices were 3.1% higher than a year before.
Find. Lower by 0.7 percentage points (3.1 − 3.8).
Explain. No. Prices are still rising, only more slowly. Prices would fall only if the rate went below zero (deflation).
Find. £272,611.
Find. £767 a week (the middle full-time worker, before tax).
Calculate. £100 × 1.031 = £103.10.
Calculate. 3.8 − 2.6 = 1.2 percentage points.
Calculate. (272,611 − 198,169) ÷ 198,169 × 100 = 38%.
Explain. They measure different things. Average weekly earnings is a mean of all employees (including part-time, with bonuses), from a monthly business survey. Typical full-time pay is the median (middle) of full-time workers, from a yearly survey. A few high earners pull a mean up.
Calculate. (1 + 0.037) ÷ (1 + 0.029) − 1 = +0.8%. Pay rose faster than prices. (A quick estimate is +0.8 points.)
Judge. Averages hide differences: some people’s pay rose less, and their own prices (rent, energy, travel) may have risen more than the average. Pay is before tax, benefits and housing costs; the average is dragged up by high earners; one year is not a trend.
Explain. If more expensive homes happen to be sold in one month, the raw average would jump without any price rising. Adjusting for the mix compares like with like.
Calculate. (143.6 − 139.3) ÷ 139.3 × 100 = 3.1%. Index figures are rounded, so this matches 3.1% closely.
Sources: ONS (Consumer Prices Index, Average Weekly Earnings, Annual Survey of Hours and Earnings, UK House Price Index). See also: Inflation · Pay against prices · House prices · What was my money worth?.