It's all over for interest rate cuts - grab your deal now

The shock jump in inflation recorded in April looks to have killed off prospects for more interest rate cuts and put the mortgage market into the cooler.

- JAMES MOORE CHIEF BUSINESS COMMENTATOR

As I wrote on Wednesday, the consumer prices index (CPI) surging to 3.5 per cent (economists were expecting 3.3) means the City is now pencilling in just one more rate cut over the next year. Previously, the expectations were for two, and maybe more.

The markets had already started to move in a negative direction after traders took note of Bank of England chief economist Huw Pill’s recent hawkish speech. In it, he voiced fears that rates were not high enough to keep a lid on inflation. It wouldn’t take much for the swing voters on the rate-setting Monetary Policy Committee to move into the hawks’ camp after what the CPI had to show.

Where does this leave people trying to navigate the choppy seas of Britain’s housing market, in which mortgage deals below the 4 per cent level have been available, albeit only to those seeking to borrow a maximum of around 60 per cent of their home’s value?

Well, it’s not ideal. Lenders had been reducing rates in the wake of the good news on inflation during the two months before April. Now that the script has flipped, they’ll inevitably start to look at moving in the opposite direction. That’s where the interest rate swaps market, which governs the price of fixed deals, is going.