Andrew Bailey, the Governor, said he was “optimistic that things are moving in the right direction” although he would need to see more evidence of inflation falling before lowering interest rates.
Aaron Strutt, of broker Trinity Financial, said: “It wouldn’t be unreasonable to expect fixed rates to come down over the next six months and be somewhere close to the levels they were in January. Five-year fixes need to be around 4pc for people to feel like they are getting reasonable value for money.”
Mr Harris added: “Direction of travel for fixed rate mortgages should definitely be down now.
“The fact we have had big players reduce rates is positive and we will see more follow suit.”
Ahead of the Bank of England’s announcement, mortgage rates had been creeping up for several weeks.
Lenders began raising the interest rates on new fixed mortgage deals as markets digested the fact that rate cuts might not be as soon as previously forecast.
This was partly due to data showing higher-than-expected inflation in the US.
In April one economic forecaster EY Item Club revealed it now expected rates to fall to 4.5pc in 2024 up from its earlier estimate of 4pc.
Higher rates have increased the cost of borrowing, which in turn has had an impact on the housing market. Halifax said the average UK house price had risen by just 0.1pc in April, with a typical home now valued at £288,949.
David Hollingworth, of broker L&C Mortgages, said summer is traditionally a busy time for the housing market and a summer rate cut could provide a much-needed boost.
“A lot of people have been holding off purchasing until rates fall. There’ll be a lot of pent-up demand as buyers wait for the Bank Rate to drop.”
In the US inflation slowed faster than anticipated in April, fuelling speculation of rate cuts sooner than previously thought. Traders now expect the first rate cut from the US Federal Reserve to come in September, and fears of further rises have been quashed.
A brighter outlook in America gives further hope of a rate cut in the UK and boost the chances for further downward pricing for fixed rate mortgages.
