First major lender slashes mortgage rates following Trump’s tariff fallout – how will it affect YOUR bills?
MILLIONS of borrowers could be in for some good news as mortgage rates are expected to drop.
This comes as US President Donald Trump‘s new tariffs disrupt global trade, increasing the likelihood of a recession.
Financial markets are betting on the Bank of England cutting interest rates three times this year, from the current 4.5% to 3.75% by the end of 2025.
This prediction is based on the recent fall in Sonia swaps, which are used to forecast future mortgage rates.
These swap rates have dropped significantly since Trump’s tariff announcement last week.
On Monday, five-year swap rates fell to 3.63% and two-year swap rates dropped to 3.66%.
This is a sharp contrast to last week, when rates stood at 3.97% and 4.02% respectively after Trump’s announcement.
As a result, lenders have already begun reducing their fixed-rate mortgage offers.
MPowered Mortgages is the first to react, with lower rates on two, three and five-year fixed mortgages taking effect today.
For example, a two-year fix at 60% loan-to-value now starts at 4.05% with a £999 fee, or 4.29% with no fee.
Three-year fixes at the same loan-to-value start at 4.04% with a £999 fee, or 4.15% fee-free.
Five-year fixes begin at 4.14% with a £999 fee and 4.28% without.
Stuart Cheetham, chief executive of MPowered Mortgages said: “Since Trump announced the ‘Liberation Day’ tariffs we have seen a sharp fall in the swap rates which has enabled us to reduce our fixed rate mortgage rates.
“Whilst these tariffs could have a detrimental impact on the UK economy with increased prices putting extra strain on UK households, there is a silver lining for mortgage borrowers who will see rates come down over the coming week.
“As always, borrowers should seek independent financial advice before deciding on a mortgage deal.”
Mortgage brokers anticipate that more lenders will soon follow suit, potentially triggering a wave of rate reductions in the coming weeks.
Martin Temple, an economist for Leeds Building Society, said: “With sharp falls seen across Asian, European and US stock markets, underlying interest rates used to price both mortgage and saving products in the UK have fallen steeply.
“For mortgage customers, this fall is potentially welcome news, as we would expect these lower swap rates to start to feed through into lower mortgage pricing over the next couple of weeks – especially if these falls are sustained.”
How to get the best deal on your mortgage
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
What’s next for mortgage rates?
It’s a complicated picture right now.
While the UK economy isn’t growing very quickly and inflation remains high, cheaper oil prices are expected to ease inflationary pressure, potentially giving the Bank of England room to cut interest rates.
However, there are concerns that recently imposed tariffs by US President Donald Trump could push UK inflation higher by increasing the cost of imported goods from America, such as cars, medicine, and food.
Financial markets are currently predicting several interest rate cuts by the Bank of England this year.
These cuts could stimulate the economy by encouraging borrowing and spending.
There’s even a small chance that the tariffs might lead to lower prices for some goods in the UK, if cheaper imports from other countries fill the gap left by more expensive US goods. However, this is not the prevailing view.
The Bank of England’s response to the tariffs will depend on various factors, including how the tariffs affect inflation, economic growth, and the value of the pound.
It’s worth noting that while mortgage rates are influenced by the Bank of England’s base rate, they are not directly tied to it.
Instead, they are driven by swap rates, which are linked to government bond yields.
At present, swap rates are falling, which means borrowers can expect to see a wave of reductions and more competitive mortgage deals entering the market in the near future.
Different types of mortgages
We break down all you need to know about mortgages and what categories they fall into.
A fixed rate mortgage provides an interest rate that remains the same for an agreed period such as two, five or even 10 years.
Your monthly repayments would remain the same for the whole deal period.
There are a few different types of variable mortgages and, as the name suggests, the rates can change.
A tracker mortgage sets your rate a certain percentage above or below an external benchmark.
This is usually the Bank of England base rate or a bank may have its figure.
If the base rate rises, so will your mortgage but if it drops then your monthly repayments will be reduced.
A standard variable rate (SVR) is a default rate offered by banks. You usually revert to this at the end of a fixed deal term, unless you get a new one.
SVRs are generally higher than other types of mortgage, so if you’re on one then you’re likely to be paying more than you need to.
Variable rate mortgages often don’t have exit fees while a fixed rate could do.
