Not usually a very interesting subject but inflation is
something that we have all suddenly become quite familiar with.
Inflation rates can be difficult to predict and are liable to
change suddenly because of world events, as we have recently
seen.
Property documents with reviews and payments are often tied to
fixed dates and so will not necessarily be able to adapt quickly to
changing trends. Most property documents when linking payments to
inflation use an inflation index, the principal measure of
inflation in the UK is the Consumer Price Index (CPI).
Another index is the Retail Prices Index (RPI) which measures
the average change, month to month, of the cost of specific retail
goods and services in the UK including mortgage interest payments.
RPI is no longer the principal measure of inflation but remains
popular in the property industry, one of the reasons being that
annual RPI increases have averaged about 1% higher than CPI.
