On a monthly basis, CPI rose by 0.4% in December, compared with a rise of 0.3% in December 2024.

Meanwhile, CPIH grew by 0.4% last month, compared with a rise of 0.3% in December 2024.

According to the latest figures, alcohol and tobacco and transport made the largest upward contributions to the monthly change in both inflation rates.

Darrell Walker, group sales director at Chetwood Bank for ModaMortgages and CHL Mortgages for Intermediaries, said: “Despite the uncertainty around the announcement, bricks and mortar remained in demand — this trend has continued in the first few weeks of this year.

"Indeed, we've already seen the market moving past the usual festive slowdown, and the general feeling is that momentum is building.’’

He pointed to Rightmove’s HPI jumping 2.8% in January, the largest monthly jump since 2015, which suggests a market that is doing well.

“With forecasts of further Bank of England rate cuts and lower borrowing costs, we’re expecting demand to rise in the coming weeks,’’ he added.

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“If that demand materialises, the market could be on the cusp of more meaningful price gains. However, regulatory changes, including EPC requirements and the Renters’ Rights Bill, remain potential obstacles for some buyers and investors.”

Paresh Raja, CEO at Market Financial Solutions, commented: “The market suffered in October and November from all the turbulence building up to the Autumn Budget. We saw how that impacted house prices in some of the other major indices, and the ONS data reaffirms the growth slowdown. 

“But what really matters is what comes next; the Bank of England cut the base rate just before Christmas, there are expectations of two more base rate cuts this year, and a lot of the political uncertainty has passed, meaning the stage is set for the property market to perform well in 2026.

“We're certainly seeing a lot more demand and intent in the market in January, and with another rate cut unlikely in February, it is now up to lenders to work with brokers to deliver fast, flexible products that help borrowers seize emerging opportunities.”

Kris Brewster, director of retail banking at LHV Bank, added: “This rise in CPI inflation to 3.4% will worry many people and raises fresh questions about the Bank of England’s grip on the economy.

“After repeated signals that price growth was coming under control, this move shows how uncertain the position still is, especially as services costs remain high.

“After missing its target for well over a year, it is hard to argue that the Bank has inflation firmly under control. Each setback adds more pressure on households who are already struggling with high bills and wages that are not keeping pace.”

Nathan Emerson, CEO at Propertymark, concluded: “To witness inflation creep back upwards again will no doubt be disappointing for many consumers who will have been hoping to see a drop as we move further into the first quarter of 2026. With luck, this will prove to be a small blip in what has otherwise been a sustained downward trend over recent months.

“Should inflation continue to trend downward overall during the course of the year, we should start to see a more buoyant mortgage market, reflecting a greater degree of affordability not seen for some time.”