THE cost of living leapt in October as households faced spiralling petrol and food bills, the latest figures show.

Motorists paid an average of 2.7p more for a litre of petrol due to higher fuel duties and soaring oil prices, while higher costs for bacon, fruit, milk and bread hit shoppers, according to the Office for National Statistics.

The price rises led to a higher-than-expected jump in the official inflation measure, the Consumer Prices Index (CPI), to 2.1 per cent during October - above the Bank of England's 2 per cent target for the first time since June.

And despite recent signs of a slowing housing market and an easing of retail spending, homeowners are unlikely to benefit from a cut in interest rates until next year as the Bank battles to control inflation.

Last week, petrol prices reached an average £1 a litre for the first time as oil prices neared 100 US dollars a barrel.

The soaring petrol and food costs, as well as a rise in air fares, more than offset the deflationary effect of lower gas and electricity bills, which most pundits had expected to keep inflation below the 2 per cent target during the month.

Yesterday's ONS data also showed that headline Retail Prices Index inflation, which includes mortgage payments, increased from 3.9 per cent to 4.2 per cent during October.

Acting leader of the Liberal Democrats Vince Cable called for house prices to be included in the calculation of inflation rates.

He said: "We now find ourselves in the nightmare situation of a slowing economy due to a stagnating housing market and people struggling to service high levels of debt.

"Housing must be included in the inflation measurements used by the Bank of England if our interest rates are to accurately reflect the state of the economy."