Borrowers could see some “really big cuts” to mortgage rates this week amid Trump-induced chaos in global markets, industry insiders have predicted.
One consequence of the US president’s announcements has been the price of oil plummeting, which could end up being deflationary and give the Bank of England greater scope to cut.
Swap rates, which are used to determine how much lenders are charged to borrow money in order to lend, have fallen from 4% on 1 April to 3.7% at the end of last week.
The rates are based on what markets think will happen to interest rates in the future. Markets are now pricing in three, rather than two, further interest rate cuts this year.
The mortgage rates being offered to borrowers on the high street tend to follow swap rates. So, if swap rates fall, mortgage rates go down.
Laith Khalaf, head of investment analysis at AJ Bell, said there was a “high degree of uncertainty” about what happens next but…
“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.”
Several brokers are expecting Trump’s economic turmoil to continue, which could see lenders offer sub-4% deals by the end of the week.
“We could see some really big cuts in fixed rate mortgage pricing this week,” said Riz Malik, independent financial adviser at advice firm R3 Wealth.
“It will take a brave lender to make the first big move on rates, but once one does, others may quickly follow.”
Pete Mugleston, managing director at Online Mortgage Advisor, has predicted the market is “getting closer to seeing two and three-year fixed rates started with a 3”.
“If the current trends hold, it wouldn’t be surprising to see lenders break that barrier in the coming weeks. However, many are holding back, likely waiting for sustained swap rate stability before repricing aggressively. We’re definitely edging into more exciting territory,” he told Newspage.
We have already seen some lenders offer deals for less than 4%, including Santander, First Direct and Barclays.
However, these have been for people with larger sized deposits and often come with high fees or a requirement to be purchasing an energy efficient home.
