Millions could be paying over the odds on their mortgages due to unreliable figures produced by Britain’s official statistics watchdog.

In a dramatic admission, Bank of England Governor Andrew Bailey told MPs that a lack of faith in key data from the Office for National Statistics (ONS) “does have a bearing” on decisions over interest rates - the very decisions that directly affect monthly mortgage bills.

This means that if the Bank cannot trust official job and wage figures, it may be holding off on cutting interest rates so leaving borrowers out of pocket.

The warning will be deeply worrying for Britain’s 8.4 million mortgage holders, particularly the 1.1 million with loans linked directly to interest rate movements.

A modest 0.25 percentage point cut in rates earlier this year slashed annual payments on a typical tracker mortgage by £348 and saved those on a standard variable rate £166, according to UK Finance. Any delay in further cuts could cost homeowners hundreds of pounds a year.

At the heart of the row is the ONS’s Labour Force Survey (LFS), which underpins the nation’s understanding of the jobs market. The Bank uses this data to assess whether inflation is likely to rise or fall - and whether rates should go up or down.

However, response rates to the survey have plummeted since the pandemic, making the figures less reliable. The Governor admitted the Bank is now having to “piece together” information from alternative sources to get a clearer picture.

Speaking at a hearing of the Treasury Select Committee, Mr Bailey said efforts to fix the issue are “a work in progress” and warned there is “a very severe health warning” over the official data.

Deputy Governor Sarah Breeden said the Bank has turned to data from HM Revenue & Customs to try to fill the gap - but this too has limitations, notably that it excludes the self-employed, a significant portion of the workforce.

Mr Bailey has previously described the problems as a “substantial issue”, but his latest remarks go even further, linking the data failures directly to the Bank’s crucial interest rate decisions.

The reliability crisis at the ONS deepened last week when it admitted it had overstated the UK’s inflation rate in April by 0.1 percentage points due to a blunder in calculating vehicle tax data.

The admission came just days after ONS chief Sir Ian Diamond stepped down for health reasons, prompting further concern over leadership and direction at the troubled agency.