When ray tracing is enabled, textures and lighting quality goes weird

Lumen has its own hardware raytracing methods, which you’ve already enabled (“Use Hardware Raytracing if available”) but in addition to that usually you will want to set “Ray Lighting Mode” to “Hit Lighting for Reflections”

Translucency type in your post process should be set to Raster, not Raytracing. This is confusing, I know, but Raster is what Lumen uses.

In order to get better reflections for indirect lighting you may also want to use these settings posted by @BananableOffense in the Lumen feedback thread: Lumen GI and Reflections feedback thread - #1936 by BananableOffense

They will greatly improve the quality of indirect lighting in reflections (with the tradeoff that Lumen will be slower to adjust to dynamic lighting changes.)

Those are the settings you should be using to utilize hardware raytracing. Optionally, you can also use raytraced shadows, though I would not recommend it in 5.3 as it has self-shadowing artifacts with Nanite. This is mostly fixed in 5.5 with Megalights.