ONS, the UK Statistics Authority has decided to implement an improved method following a report from the National Statisticians Consumer Prices Advisory Committee (CPAC) on the measurement of mortgage interest payments within the Retail Price Index (RPI).
This improvement will be implemented for the February 2010 index published on the 23 March 2010.
The changes, which were recommended by the CPAC are as follows:
As part of the routine and planned annual basket update of the Retail Prices Index (RPI), the UK Statistics Authority has decided to implement a change recommended by the National Statistician’s Consumer Prices Advisory Committee (CPAC). This change relates to the measurement of mortgage interest payments within the RPI. CPAC recommended:
a. The Office for National Statistics changes the interest rate measure used in the calculation of mortgage interest payments in the RPI from the Standard Variable Rate (SVR) to an Average Effective Rate (AER) and that the choice of rate should be kept under review in future and changed, if necessary, at the annual RPI reweighting
b. The AER should be introduced into the published RPI in March 2010, at the same time as the annual update of the basket of goods and services that underpin the RPI (and CPI)
This decision follows a period of public consultation that took place on these proposals between 30 October 2009 and 22 January 2010 in line with the National Statistics Code of Practice. An assessment of the change was also conducted by the Bank of England under the provisions of the relevant part of the Statistics and Registration Service Act 2007. This improvement is consistent with the aim that the components of the RPI should be measured as accurately as possible in order to represent the average measure of change in the prices of goods and services bought for the purposes of consumption by the vast majority of households in the UK.
The AER will first be used in the February 2010 RPI which will be published on 23 March 2010. Other improvements will be announced on 15 March 2010.