MILLIONS of borrowers could be in for some good news as mortgage rates are expected to drop.
This comes as US President ‘s , increasing the likelihood of a .
are betting on the cutting interest rates three times this year, from the current 4.5% to 3.75% by the end of 2025.
This prediction is based on the recent fall in Sonia swaps, which are used to forecast mortgage rates.
These swaps have dropped significantly since Trump's tariff announcement last week.
On Monday, five-year swap rates fell to 3.63% and two-year swap rates dropped to 3.66%.
This is a sharp contrast to last week, when rates stood at 3.97% and 4.02% respectively after Trump's announcement.
As a result, lenders have already begun reducing their fixed-rate mortgage offers.
MPowered is the first to react, with lower rates on two, three and five-year fixed mortgages taking effect today.
For example, a two-year fix at 60% loan-to-value now starts at 4.05% with a £999 fee, or 4.29% with no fee.
Three-year fixes at the same loan-to-value start at 4.04% with a £999 fee, or 4.15% fee-free.
Five-year fixes begin at 4.14% with a £999 fee and 4.28% without.
Stuart Cheetham, chief executive 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 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.”
Mortgage brokers anticipate that more lenders will soon follow suit, potentially triggering a wave of rate reductions in the coming weeks.
Martin Temple, an economist for Building Society, said: “With sharp falls seen across Asian, European and US stock , underlying interest rates used to price both mortgage and saving products in the UK have fallen steeply.
“For mortgage customers, this fall is potentially welcome , as we would expect these lower swap rates to start to feed through into lower mortgage pricing over the couple of weeks – especially if these falls are sustained.”
What's next for mortgage rates?
It's a complicated picture right now.
While the UK economy isn't growing very quickly and remains high, cheaper oil prices are expected to ease inflationary pressure, potentially giving the Bank of room to cut interest rates.
However, there are concerns that recently imposed tariffs by US President could push UK inflation higher by increasing the cost of imported goods from America, such as , medicine, and food.
Financial markets are currently predicting several interest rate cuts by the Bank of this year.
These cuts could stimulate the economy by encouraging borrowing and spending.
There's even a small chance that the tariffs might lead to lower prices for some goods in the UK, if cheaper imports from other countries fill the gap left by more expensive US goods. However, this is not the prevailing view.
The Bank of England's response to the tariffs will depend on various factors, including how the tariffs affect inflation, economic growth, and the value of the pound.
It’s worth noting that while mortgage rates are influenced by the Bank of England's base rate, they are not directly tied to it.
Instead, they are driven by swap rates, which are linked to government bond yields.
At present, swap rates are falling, which means borrowers can expect to see a wave of reductions and more competitive mortgage deals entering the market in the near future.
