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

Britain's biggest lender, Halifax, said today it would cut its mortgage rates this week, although higher-than-expected inflation figures this morning make a rate cut in the summer seem unlikely.

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

The latest cut follows price cuts in recent days at rival “Big Six” lenders HSBC, Santander and Barclays.

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

The headline inflation rate of 2.3% – and much higher than expected readings for the closely watched core and services inflation indicators – prompted traders in the City to bet against rate cuts in the summer. Before today, markets had seen a rate cut at the Bank of England's next meeting in June as about a 50/50 chance. But now they see it as just a one in eight chance. A further hold on rates in August is also seen as more likely, with the next cut now expected in the autumn.

These changes in expectations have led to a rise in the swap rates used to price mortgage loans. They could now lead to rising mortgage prices again. However, a lack of demand from homebuyers could prevent such a rise.

Aaron Strutt, product and communications director at Mayfair-based mortgage broker Trinity Financial, said: “We're at a point where mortgage rates are probably too high for many buyers, so they're just waiting for rates to come down again.”

“The housing market is quieter than it should be because people are waiting to buy. We expect more major banks to announce price improvements this week.”