FOI REF: FOI-2023-1181
You asked
To better understand the behaviour of Retail Price Index (RPI), I am looking for the Average Effective Rate (AER) that is used to compute the Mortgage Interest Payment (MIPS) of RPI. According to Section 11.5.1.2 of the Technical Manual, ONS calculates its own AER rate which is not necessarily the same as the AER rate published by the Bank of England. May I please ask for the monthly AER rate that actually went into RPI since its adoption in 2010?
You said
Thank you for your request.
The Average Effective Rate (AER) series that is used in compiling the Mortgage Interest Payments (MIPs) component of the Retail Prices Index (RPI) is included in the associated download 'AER used in the compilation of the mortgage interest payments series in the Retail Prices Index'. It is not the same as the series published by the Bank of England, but it is produced by the Bank specifically for use in the RPI. The series differs from the published AER because the weights used in combining the various mortgage rates are updated once each year in January, as opposed to each month.
The dataset includes two figures for January each year. The interest rate is first calculated using the previous year's weights and is the final point in the previous year's series, described as "January, year + 1" in the table. It is then calculated again using the current year's weights and forms the starting point or base for the current year's series, described as "January" in the table. This is in line with the standard RPI construction methodology as described in the Consumer Price Indices Technical Manual.