Millions of UK mortgage holders may be overpaying due to questionable statistics

Bank of England Governor Andrew Bailey told MPs a lack of faith in key data from the Office for National Statistics 'does have a bearing' on decisions over interest rates

Millions might be paying too much for their mortgages due to unreliable figures from the Office for National Statistics (ONS), as acknowledged by Andrew Bailey, the Governor of the Bank of England. Bailey informed MPs that the absence of confidence in critical ONS data "does have a bearing" on decisions concerning interest rates—decisions that impact monthly mortgage repayments directly.

If the Bank doubts official employment and wage statistics, it might hesitate to reduce interest rates, potentially disadvantaging borrowers. This news could particularly unsettle the 8.4 million mortgage holders in Britain, especially the 1.1 million with loans tied to interest rate changes.

A previous 0.25 percentage point reduction in rates this year trimmed yearly payments on an average tracker mortgage by £348, offering a £166 saving to those on standard variable rates, per UK Finance. Any postponement in further reductions could mean homeowners lose hundreds of pounds annually.

The controversy centres on the ONS's Labour Force Survey (LFS), vital for understanding the job market and used by the Bank to consider inflation trends and set rates. Since Covid-19, the survey has seen response rates drop, casting doubts on its reliability, leading the Governor to admit that the Bank must now "piece together" information from other sources for a clearer economic picture.

Speaking at a Treasury Select Committee hearing, Mr Bailey acknowledged that rectifying the data issue is "a work in progress" and cautioned that there is "a very severe health warning" over the official figures.

Deputy Governor Sarah Breeden pointed out that while the Bank has turned to HM Revenue & Customs data to attempt to patch the deficit, this also has shortcomings, especially as it omits the self-employed, who makeup a sizeable fraction of the workforce.

Previously characterised by Mr Bailey as a "substantial issue", his most recent comments draw a direct link between these data inaccuracies and the Bank's pivotal interest rate decisions. Last week, the credibility crisis at the Office for National Statistics (ONS) intensified when they confessed to overstating the UK's inflation rate in April by 0.1 percentage points due to an error in calculating vehicle tax data.

This confession emerged shortly after ONS chief Sir Ian Diamond resigned for health reasons, triggering additional concerns about the leadership and direction of the body.