The reductions are down to interest rate swaps – which move in line with expected changes to the Bank of England base rate – having dropped since President Trump announced his tariffs
Mortgage lenders have started cutting rates after Donald Trump’s tariffs announcement sparked expectations that UK interest rates could fall next month. TSB has reduced rates by up to 0.25 percentage points, as has Coventry Building Society, which has launched a sub-4% deal.
Elsewhere, Clydesdale Bank has lowered rates by up to 0.64 percentage points, Gen H has made rate cuts of up to 0.20 percentage points, and MPowered Mortgages has trimmed rates by up to 0.21 percentage points. The reductions are down to lower interest rate swaps – which move in line with expected changes to the Bank of England base rate – after President Trump announced his “Liberation Day” tariffs.
The movement is being described as a “silver lining” for mortgage borrowers. Laith Khalaf, head of investment analysis for AJ Bell, said: “Trump’s tariff announcement might have created havoc in the stock market, but there could be a silver lining for UK mortgage borrowers. Interest rate expectations are falling as markets price in the potential economic damage from US tariffs, and the likelihood the Bank of England will respond with interest rate cuts.”
He said traders in the financial markets were now “fully pricing in” a cut to UK interest rates when Bank of England policymakers next meet on May 8. A group of analysts for Investec said a lack of retaliation from the UK would “make it easier for the MPC (Monetary Policy Committee) to cut rates“ in the future.
They added: “Markets are now pricing in between three and four extra 0.25 percentage points UK rate cuts by the end of this year; on April 1 only around two cuts had been priced in.” The Bank of England base rate is currently at 4.5% and was held at this level at its last meeting in March.
However, some economists have warned that the tariffs could push up prices, which would add to inflation and could further interest rate cuts less likely. President Trump imposed a reciprocal 10% tariff on all imports from the UK, while the European Union has been slapped with a 20% tariff. Other countries have been hit harder, including China which has been slapped with a new 104% rate on some imports.
UK stocks fell sharply again today, with the FTSE 100 falling 2.34% shortly after opening, wiping out most of the gains made on Tuesday. Similar falls were seen in Asian stock markets overnight, with the Japan Nikkei 225 down around 4% and the Taiwan Taiex lost roughly 6%.
Different types of mortgages explained
If you have a tracker mortgage, it means your deal and monthly repayments move in line with the Bank of England base rate. A tracker mortgage usually tracks above the base rate. If you have a standard variable rate (SVR) mortgage then your deal can change at any time, though they do roughly tend to move in line with the base rate too.
SVRs are generally the most expensive type of mortgage. If you have a fixed rate mortgage, it means you have agreed to pay a fixed amount each month for a set period of time. You are normally moved to your lender’s SVR when your fixed deal ends. If your mortgage is due to expire, you should compare rates now and speak to a mortgage broker to look at your options.
Generally speaking, lenders let you secure a new deal around three months in advance. If rates come down, you may be able to cancel the deal you’ve agreed to and sign up to a cheaper rate – but check with your lender before signing up first to see if there are any fees.
The latest data from Moneyfacts shows the average two-year fixed residential mortgage rate today is 5.30%, down from 5.32% the previous working day. The average five-year fixed residential mortgage rate today is 5.15%. This is down from 5.17% the previous working day. There are currently 6,969 residential mortgage products available, up from 6,951 the previous working day.
