Analysts have welcomed the drop in inflation but most people are not likely to see much difference, ITV News' Business and Economics Editor Joel Hills reports
The government, economists and the financial industry are all hailing today's unexpected drop in inflation as good news, but does it actually help people struggling with the cost of living crisis?
Most economists had expected the rate of inflation to fall to 8.2% in June.
The ONS said falling fuel prices were the biggest driver behind the drop, down by a record 22.7% in June.
The average petrol and diesel prices were at 143p and 145.7p a litre respectively last month, compared with 184p and 192.4p a litre a year earlier.Falling fuel prices will be welcome to the millions of drivers across the country, but how else is the drop in inflation going to impact people still struggling with the cost of living crisis?What does it mean for food prices?
It means prices are falling when compared to the recent past but if you go back a year or more, they are still far higher than what people are used to.
Within the overall rate of 7.9% inflation, the official figures showed food inflation had dropped 1.4% from 18.7% in May to 17.3% in June, but was still painfully high for shoppers.
It was the third month in a row where food prices fell, as many supermarkets began cutting the price of key staples after months of sky-high prices.
Bosses at both Sainsbury's and Tesco have said in recent weeks they believe they have passed the peak of food inflation.
This means on the shelves you may see food prices cheaper than they were a month ago, but they will still be far higher than a year ago.
For example, according to the ONS, the price of cheese in May 2023 was 33.4% higher than it was in May 2022.
The latest figures show this gap is now falling, in June 2023 the price of cheese was 25.1% higher than it was in June 2022.
This equates to an average 500g block of cheese, according to the ONS, costing £4.85 in May and £4.73 in June.
So yes, prices are falling if you look at a short time frame, but if you go back a year to June 2022 500g of cheese cost £3.47, and in June 2021 500g of cheese cost £3.10.
On top of this, although the price of many staples like cheese, olive oil, bread and meat are now falling, other key items continue to increase.
The price of sugar, fruit juices, chocolate, crisps and coffee all increased between May and June.
What does this mean for mortgages?
As the Bank of England has tried to grapple with inflation by raising interest rates the cost of fixed-term mortgages has soared.
This has put pressure on many mortgage holders who have come off their fixed-term rates and seen their interest payments double or triple.
There have been stark warnings about millions of households paying hundreds more a month as their terms expire over the next two years.
The higher interest rates have also made it even harder for first-time buyers who are struggling to get on the housing ladder and renters who are often having increased interest payments on buy-to-let houses put on them by their landlords.
Last month the average interest rate of a two-year fixed-term deal went above the heights seen during the mini-budget crisis last October.
Lenders were worried by the slow pace at which inflation despite analysts predicting otherwise, causing them to hike prices.
In the following month prices have still been climbing with the average two-year fixed-rate homeowner mortgage rate on the market on Wednesday is 6.81%, up from 6.78% on Tuesday, according to Moneyfactscompare.co.uk.
But with Wednesday's data revealing inflation is falling faster than expected many will be hoping mortgage interest rates will fall.
However, the markets still believe the Bank of England will increase interest rates at its next meeting on August 3.
Current estimates expect a 0.25% increase to 5.25% as it battles to bring inflation back to its 2% goal.
Economist James Smith at ING said it will be a "close call" whether the Bank votes for a quarter or half percentage point rise in August, with record wage growth being watched intently.Andrew Montlake, managing director of mortgage brokers Coreco added: “Whilst this may not yet mean we see a wholesale fall in mortgage rates, lenders should at least now move away from sudden rate hikes and also enjoy a period of calm reflection.”Lewis Shaw, founder of Shaw Financial Services, said he was "going out on a limb" to bet mortgage rates had hit their peak, despite the expected interest rate rise next month.
Many analysts called Wednesday's inflation data good news, but few said they expected mortgage rates to fall significantly over the next few months.
Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know...