Britain plunges into deflation as RPI tumbles

Britain has fallen into official deflation for the first time since 1960, according to new figures from the Office for National Statistics (ONS).

The Retail Price Index (RPI) dropped to -0.4% from 0.0% in February, largely due to house depreciation and mortgage interest payments. There were also large downward contributions from food and fuel prices as well as travel costs.

The Consumer Price Index (CPI) also fell from 3.2% to 2.9% in the year to March and is tipped to fall further in the coming months.

Over the same period, the all items RPI excluding mortgage interest payments index (RPIX) also lost ground, sliding 0.3% since February to 2.2% in March.

The change in RPI annual rate came predominantly from house depreciation. The effect from mortgage interest payments follows February's half point decrease in the Bank rate to 1% with the dwelling insurance and ground rate with average insurance premiums also falling this year.

However, the largest upward contribution to the RPI annual rate came from the cost of motoring, especially from buying new cars. There was also a large uplift in vehicle tax and insurance as insurance premiums rose in the past year.

The CPI annual rate was dragged lower by housing and household services. Gas bills and the price of heating oil tumbled while food and non-alcoholic drink prices also fell.