In the wake of Donald Trump’s recent tariff announcements, homeowners are starting to see mortgage rates fall. Financial markets have reacted sharply to these announcements, adjusting forecasts to anticipate faster-than-expected interest rate cuts. The Bank of England (BoE) is now predicted to lower rates three more times throughout 2025, with the expectation that they will end the year at 3.75%, down from the current rate of 4.5%.
The shift in market sentiment is tied to fears of an economic recession. As economic uncertainty grows, the BoE is expected to act more aggressively to support the economy. With interest rates projected to decrease at a faster pace, mortgage lenders are already adjusting their pricing strategies.
Falling Sonia Swaps Signal Future Rate Cuts
This expectation of faster rate cuts is reflected in the movements of Sonia swaps, an inter-bank lending rate that predicts future mortgage rates. These swaps are a crucial tool for lenders, used to determine the pricing of fixed-rate mortgages. Since President Trump’s tariff announcement, Sonia swaps have been falling rapidly, signaling that mortgage rates may soon follow.
At the start of today, five-year swaps stood at 3.63%, while two-year swaps were at 3.66%. This marks a significant drop from the 3.97% and 4.02% levels seen last week, directly following Trump’s tariff announcement. As swap rates continue to slide, mortgage borrowers are hoping that fixed mortgage rates will decrease accordingly.
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MPowered Mortgages Leads the Charge with Rate Cuts
One lender that has already responded to the fall in Sonia swaps is MPowered Mortgages, which has announced rate cuts across its full range of fixed-rate mortgages. Starting tomorrow, MPowered Mortgages will offer lower rates on both two-year and five-year fixed options, with some starting as low as 4.05% for a two-year fix and 4.14% for a five-year fix.
These new rates will be available to borrowers with at least a 40% deposit. The lower rates come with a £999 fee, and the lender hopes that the price cuts will make mortgage products more accessible to homebuyers and remortgagers alike. Stuart Cheetham, CEO of MPowered Mortgages, acknowledged that while the tariff-related changes could have negative consequences for the UK economy, there is a silver lining for mortgage borrowers, who will see lower rates in the short term.
“We’ve seen a sharp fall in the swap rates since Trump’s announcement, which has allowed us to reduce our fixed-rate mortgages,” said Cheetham. “While the tariffs could put pressure on household budgets, this drop in mortgage rates provides much-needed relief for borrowers.”
More Lenders Expected to Follow Suit
As MPowered Mortgages leads the way with lower rates, experts predict that more lenders will soon follow suit. Pete Mugleston, Managing Director at Online Mortgage Advisor, told Newspage that with Sonia swaps continuing to decline, it wouldn’t be surprising to see two and three-year fixed rates dip below 4% in the coming weeks. “If the current trends hold, we could soon see lenders offer rates under the 4% mark,” Mugleston said.
However, many lenders are likely waiting for a period of swap rate stability before making their moves. As the market adjusts, mortgage brokers expect the competition to heat up, with rate cuts becoming more widespread in the coming weeks.
Mortgage Market Poised for a Shift
The current trend is a hopeful sign for homeowners, particularly those looking to remortgage or enter the housing market. With house prices reportedly dipping according to Halifax, a drop in mortgage rates could provide the much-needed boost for a market that has been hesitant in recent months. Riz Malik, Independent Financial Adviser at R3 Wealth, echoed this sentiment: “We could see some really significant cuts in fixed-rate mortgage pricing this week, and that could inject some much-needed momentum into a market that’s been uncertain.”
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