Mortgage lenders look set to launch a price war with borrowers in line for more rate cuts, experts have said.

Multiple lenders including HSBC, Santander, The Co-Operative Bank and Virgin Money have cut rates in recent days, and brokers say more are expected to follow, with NatWest due to reduce prices on Tuesday.

Banks have been able to reduce their prices after a combination of Donald Trump’s tariff plans – which are set to dampen the economy – and lower-than-expected inflation figures which have raised the prospect of multiple Bank of England rate cuts in 2025.

Brokers generally expect rate falls to continue, saying lenders are “sharpening their pencils” ahead of a “fight” for market share.

Financial markets now expect between three and four interest rate cuts in 2025, with the next one only weeks away.

And lenders have started to drop prices as a result, raising the prospect that others could follow with more deals below 4 per cent in a fight for customers.

Several lenders are now offering mortgage rates below 4 per cent, including Lloyds, Barclays and Santander, but these deals require mortgage holders to have large deposits or equity worth 40 per cent of their property’s value.

Jane King, mortgage adviser at Ash Ridge, said: “There is a bit of competition going on. We are definitely seeing some significant reductions in fixed rates right now and the start of new sub-4 per cent rates are a very good sign.”

King said that there was a drop in the volume of lending going on after stamp duty costs increased at the start of April for new buyers, and lenders were now competing to attract buyers.

Lewis Shaw of Shaw Financial Services added: “It’s not quite a rate war – yet – but with the major lenders now sharpening their pencils, we may be on the cusp of a real fight for market share. Despite ongoing global volatility, swap rates have held firm, and a base rate cut in May looks increasingly like a done deal.”

Andrew Montlake, foundering partner and mortgage broker at Coreco, said: “We are now seeing lenders actively cutting rates and returning to the sub-4 per cent level, they are not dramatic cuts and slow and steady still seems to be the order of the day. The days of all out rate war may follow in time, but at the moment lenders seem to be engaged in more local skirmishes.”

Aaron Strutt, product and communications director at Trinity Financial, said: “Banks and building societies seem to be dipping in and out of the sub-4 per cent mortgage market. A few weeks ago, all of the sub-4 per cent rates were pulled, and now we have a selection of lenders offering them again. This shows how much the market is fluctuating at the moment.

“Mortgage borrowers may be in line for more unexpected rate cuts following Donald Trump’s tariff interventions. The cost of funding mortgages has dropped, meaning lower fixed rates may be coming.”

In some ways, lower mortgage rates would be good news for Rachel Reeves and Sir Keir Starmer, who have pledged to put more money in people’s pockets and made real household disposable income a key indicator by which the Government should be judged.

But the background to the rates falling is generally less positive. Reduction expectations are partly being fuelled by predictions that the economy could stagnate this year, which is generally bad news for people’s pay and the jobs market.

So on the one-hand while it is good news for home owners who have been hit with higher rates in recent years, any gain could be cancelled out by lower pay and a struggling economy.

Part of the reason interest rates are expected to fall is because the Bank of England is likely to be concerned that US taxes on imports – and China’s retaliation – could have a negative effect on the global economy, which could affect the job market.

Cutting borrowing costs is seen as a way of dampening this impact.

Shaw also warned that rate cuts, coupled with some mortgage lenders easing their affordability rules to allow people to borrow more money could see property prices increase.

“The stage is set for renewed upward pressure on house prices. Most won’t expect it. Many will be caught off guard,” he said.

However, some experts have warned that the volatile global situation means drops in rates are not certain.

Nick Mendes of John Charcol brokers has predicted that the cheapest rates could reach 3.5 per cent by the end of 2025, but added: “Global risks, especially the evolving situation with US trade policy, could still inject volatility.

“Lenders are trying to strike a balance: some are reacting quickly to market shifts, and we’re seeing more borrowers switching deals mid process to lock in better offers. That’s increasing pipeline risk, and lenders will be approaching the situation carefully to avoid service level pressures.”