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Halifax reduces mortgage prices despite inflation dashing June Bank of England rate cut hopes

The UK’s largest lender, Halifax, announced today that it will cut its mortgage rates this week, despite this morning’s higher-than-expected inflation reading appearing to make a Summer interest rate cut unlikely.

The new mortgage rates will come into effect on Friday (24 May).

The latest reduction follows a cut in prices in recent days from rival ‘big six’ lenders HSBC, Santander and Barclays.

It also comes despite higher-than-expected consumer price inflation figures released by the Office for National Statistics (ONS) this morning.

The 2.3% headline inflation rate - and much higher-than-expected readings for the closely watched core inflation and services inflation measures - prompted City traders to bet against summer interest rate cuts. Before today, markets had seen an interest rate cut at the Bank of England’s next meeting in June as roughly a 50/50 possibility. However, now they see it as just a one-in-eight shot. Another hold in August is also seen as more likely than not, with the next cut now expected to be in the autumn.

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Those revised expectations, which have led to a surge in swap rates that are used to price mortgage products, could lead to mortgage prices rising again, but a lack of demand from home buyers could prevent such a surge.

Aaron Strutt, product and communications director at Mayfair-based mortgage broker Trinity Financial, said: “We have got to the stage where mortgage rates are probably too high for many buyers so they are simply waiting for fixes to come back down.

“The property market is quieter than it probably should be because people are holding off buying. We are expecting more big banks to announce pricing improvements this week.”