Has inflation been quietly stealing your hard-earned money? You're not alone. While the headlines might tell you inflation is cooling down from its terrifying peak in 2022, the truth is, rising prices are still a painful reality for millions. We're all feeling the pinch, but the big question is: how much is it really costing you?
The Consumer Prices Index (CPI), a key measure of inflation, stubbornly remains above the Bank of England's target of 2%. As of September, it clocked in at 3.8%. And CPIH, which includes housing costs, is even higher at 4.1%. The experts predicted a faster decline, and frankly, so did we all. But here's where it gets controversial... even when inflation does ease, it doesn't mean prices are going down! It simply means they're increasing at a slower pace. Think of it like this: instead of your grocery bill going up by £20 each week, it might only go up by £10. Still going up, just not as quickly.
Now, those official inflation figures? They only paint a partial picture. And this is the part most people miss... How rising prices impact your wallet depends entirely on your life. What you buy, how often you travel, whether you have a mortgage, kids, pets – all of these factors play a huge role. As Holly Tomlinson, a financial planner at Quilter, aptly puts it: "Inflation has eroded household purchasing power, but more so for some than others. Inflation is not a 'one size fits all' issue and personal circumstances will dictate its impact."
So, who's feeling the most heat from this inflationary fire? Quilter dug into data from the Office for National Statistics (ONS) to pinpoint which groups are struggling the most. They looked at how average annual household spending has changed across different categories up to June 2025 (the most recent data available) and combined this with the latest CPI figures, house prices, and mortgage rates. What they uncovered reveals just how unevenly inflation hits different segments of society.
Many rising costs affect multiple groups – housing, for example, includes council tax, utility bills, and home maintenance. However, some groups face specific financial burdens, such as school fees or hefty mortgage interest payments. Let's break down the key groups and see how inflation is impacting them:
The Just Starting Outs
Imagine a single person in their twenties, fresh out of education, renting a home, and starting their first job. These "Just Starting Outs" are navigating the world and feeling the squeeze acutely. Housing costs are a major burden. According to the ONS, private rents jumped 5.5% in the 12 months leading up to September. Zoopla's latest Rental Market Report indicates that average monthly rent has reached a staggering £1,301. For someone aged 22-29, that's a massive chunk of their average weekly salary of £648, according to data from the House of Commons Library.
But it doesn't stop there. This group also needs to budget for transport, which is up 11.4% to an average of £4,586 annually. And for this tech-savvy generation, communication costs have climbed 9.4% to £1,154 a year. Overall, their average annual outgoings have increased from £44,663 to £48,394 in just one year. Marianna Hunt from Fidelity International points out: "Young renters spend a large share of their income on housing, leaving little buffer for rising food and transport costs. Limited savings and stagnant real wages make this group very vulnerable to cost of living pressures." Their inflation rate? A hefty 8.4%.
Couple with Two Children
For growing families, costs are, well, also growing. The addition of VAT to private school fees this year was a significant blow. The average cost of education for two children has skyrocketed by 22.2% to £22,000 per year, according to Quilter. Mortgage costs are another significant burden, especially for those who upgraded from a starter home to a larger family house, taking on more debt when interest rates were high. This group is likely under the most intense financial pressure of all, according to Hunt. With dependents, there's less room to cut back on essentials like groceries, clothing, and utilities. Their average overall annual costs have surged to £71,378 from £59,747 a year ago.
Families with younger children did receive a bit of relief with the expansion of free childcare hours, which took effect in September. But nursery costs are still rising, and the free provision only goes so far. As Tomlinson notes, "Younger families have seen some relief thanks to the expansion of free childcare hours, but the support rarely covers the costs." Their inflation rate? A staggering 19.5%.
Single, High Earner
While higher earnings often provide a buffer, those climbing the career ladder aren't immune to inflation. Though better equipped to handle it, their wallets still feel the pinch. For this group, the biggest cost pressures come from discretionary spending. For instance, average restaurant and hotel prices have risen by 9.6%. The cost of an all-inclusive holiday is up 9.5% year-on-year, according to ONS data, while recreation and cultural activities cost 11.3% more. And this is where opinions may diverge... some might argue that cutting back on these luxuries is an easy fix, while others see them as essential for well-being and work-life balance.
Mortgage costs are also a significant factor for this group, especially in expensive areas like London. Quilter estimates that inflation for mortgage interest for an average property in London was a whopping 37.9% over the past year, with the average total cost reaching £35,847 due to rising house prices and high interest rates. Overall, annual costs for this cohort have jumped from £59,916 to £69,822 – the highest rate of inflation among the groups analyzed, at 22.7%. However, Hunt suggests that "This group may be less affected by cost of living pressures. High earners might be better placed to absorb inflation by reducing their savings or cutting their discretionary spending."
Empty Nesters
The kids have flown the coop, and the mortgage is paid off. This couple is in their peak earning years, with one eye on retirement... and the other eye on their beloved pet. The cost of owning a pet has increased by 4% to an average of £1,036 a year, thanks to rising insurance prices, vet bills, and food costs. The biggest benefit is that their housing costs have dropped significantly now that their mortgage is cleared. Instead, miscellaneous goods and services, including spending on jewelry, cosmetics, haircuts, and subscriptions, are one of the biggest cost increases they're grappling with, with inflation in this category at 13.15%.
"Empty nesters are probably the least affected by inflation," Hunt says. "Their biggest pressures are discretionary costs such as travel and leisure. However, their strong financial position and mortgage-free state should mean they can maintain their lifestyle with minor adjustments." Their inflation rate is 9.7%.
Pensioner Couple
The loss of the £200 winter fuel payment has been a blow for wealthier pensioners, especially since energy prices are 2.2% higher than last winter and a staggering 44% higher than in 2021. The average dual-fuel household paying by direct debit spends £1,755 a year on gas and electricity under the energy price cap. Grocery prices are also a major concern, with food inflation reaching 11% last year. Food prices have increased 37% over the past five years, compared to just 4.4% in the previous five years. In the year to July, the price of coffee jumped 18%, chocolate 17.2%, and beef and veal 24.3%, according to the ONS.
On the bright side, healthcare has experienced negative inflation, with average annual costs falling 14.6% to £395.20. Average annual household spending on restaurants and hotels has reached £2,309, up 9.6% in a year – a blow to those pensioners who planned to enjoy more leisure time in their retirement. And a 30% rise in airfares recorded in July's inflation figures was the largest single-month increase on record.
Hunt notes that "Pensioners spend a larger share on essentials like heating and groceries, both of which are being hit by above-average inflation. Those on a fixed income have less flexibility to absorb rising bills, but the many who are mortgage-free will at least be protected from any interest rate rises." Their inflation rate is 10.6%.
So, what's your take? Does this analysis resonate with your personal experience? Which group do you identify with most, and what strategies are you using to combat rising prices? Share your thoughts and experiences in the comments below – let's start a conversation about how we can all navigate this inflationary landscape together! And perhaps most importantly, what do you think the government should do to help alleviate the pressure?
