Mortgage rates could drop further as lenders respond to market uncertainty triggered by US tariffs. The economic fallout from President Donald Trump’s trade policies has shifted expectations around UK interest rates, with financial markets now predicting more rate cuts than previously forecast.
The Bank of England’s base rate currently stands at 4.5%. Analysts had anticipated two cuts this year, but that number is now likely to rise to three as policymakers try to prevent an economic slowdown.
TSB Bank has announced it will reduce selected two-year fixed mortgage rates by up to 0.25 percentage points. This follows similar moves by MPowered Mortgages, which has already trimmed rates across several products.
According to Moneyfacts, despite these announcements, average mortgage rates remained unchanged on Tuesday – at 5.32% for two-year fixes and 5.17% for five-year deals. However, further reductions are expected in the coming weeks if current trends continue.
If swap rates – which lenders use to set mortgage pricing – hold steady, some deals could fall as low as 3.79%. These headline rates, however, are likely to be reserved for low-risk borrowers and may come with high fees.
A new mortgage could still mean higher monthly repayments for many homeowners whose fixed-rate deals were removed before rates began rising in mid-2021. The Financial Conduct Authority reports that 1.3 million fixed-rate deals are set to expire between April and December this year.
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