LONDON (Thomson Financial) - UK high street lenders have begun pulling their cheapest fixed-rate mortgages from the market after Tuesday’s surprise jump in inflation figures, which boosted speculation that interest rates might have to rise more than one more time this year, newspapers reported.

The Guardian said Britain’s biggest lender, the Halifax, is withdrawing most of its two- and three-year fixed-rate deals today, while Alliance & Leicester and various building societies including Portman have already pulled deals.

The Financial Times said Alliance & Leicester yesterday replaced its fixed-rate mortgages with new products that are typically 0.3 percentage points more expensive.

Tuesday’s data showed key CPI inflation grew to 3.1 pct, more than 1 point above the 2 pct target the Bank of England is charged to keep and therefore triggering an open letter of explanation from governor Mervyn King.

The news cemented expectations of a rise in interest rates to 5.50 pct in May, and boosted speculation that further rises to 5.75 pct or even 6 pct might be needed.

alex.brittain@thomson.com

abr/ro

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