Mortgage rates look set to fall as US president Donald Trump’s tariffs continue to send shockwaves through global supply chains.
Financial markets are now pricing in greater chances of economic recession with interest rate cuts now forecast to be introduced faster than before.
- The US tariffs are an effort from Trump to encourage local manufacture of products in the USA
- Mortgages rates have been holding around the Bank of England base rate, now around 4.5%
- Lower mortgage rates help existing both homeowners and investors who are looking to remortgage in addition to first-time buyers
- Mortgage rates predicted to drop from 4.5% to 3.75% by the end of 2025
- Lower mortgage rates will encourage more movement in the property market which has already begun to stabilise and this could even help encourage more rental availability as more landlords could begin to reinvest
Sonia swaps, an inter-bank lending rate which forecasts where mortgage rates will be in two or five years, have fallen in recent days following a growing belief among economists that the Bank of England will cut interest rates three more times in 2025. They are predicted to end the year at 3.75%, down from the current level of 4.5%.
Five-year swaps hit 3.63% and two-year swaps stood at 3.66% on Monday; a significant drop from 3.97% and 4.02% respectively on the day of Trump’s tariff announcement.
Fixed rate mortgage deals will almost certainly fall if swaps remain at their existing levels.
MPowered Mortgages has become the first lender to respond to a sharp fall in swap rates by cutting its full suite of fixed mortgage rates. The rate reductions will be effective from 9am today.
Fixed rates for new purchase customers:
Two-year fixed rates now start at 4.05% at 60% LTV with £999 fee and at 4.29% with no fee.
Three-year fixed rates now start at 4.04% at 60% LTV with a £999 fee and 4.15% with no fee.
Five-year fixed rates now start at 4.14% at 60% LTV with a £999 fee and 4.28% with no fee.
Stuart Cheetham, CEO 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.”
We often find that the UK property market has a direct correlation following on from the decisions made in the US, so even if the effects are not immediately obvious, the market will continue to follow US trends.
