PRICE BITE

Mortgages down in interest rate cut but food inflation to hike bills

- BY GRAHAM HISCOTT

MORTGAGE costs fell yesterday as the interest rate was cut to 4% but families’ annual food bills may rise by £290 with inflation.

The Bank of England reduced borrowing costs from 4.25% to its lowest level for more than two years.

The Bank's fifth cut since last August will boost more than a million people with variable rate mortgages, and another 900,000 whose cheap deals will expire by December.

A typical £250,000 mortgage would drop by £41 a month while a £350,000 loan would be £57 a month cheaper.

But millions of savers risk lower returns.

The cut came despite the Bank warning inflation is set to hit 4% by September, double its 2% target. It forecast food price inflation would jump from 4.5% to 5.5% by December in time for Christmas.

With the average household spending £5,283 a year on groceries, the rise could add £290 to bills.

In a blow to Chancellor Rachel Reeves - who visited a coal tip in Port Talbot, South Wales, yesterday - the Bank laid some of the blame for the spike on April's jump in employers national insurance and the national minimum wage. "These material increases in labour costs are likely to have pushed up food prices," said the Bank, estimating they had added between 1% and 2% to food price inflation.

It added many firms in the supply chain were trying to mitigate cost increases through job losses.