First lender cuts mortgage charges as tariffs set to deliver down rates of interest

Homeowners are starting to see mortgage rates fall in the aftermath of Donald Trump’s tariff announcements.

Financial markets are now pricing in greater chances of economic recession with interest rate cuts now forecast to be cut faster than before.

There is now an expectation that the Bank of England will cut interest rates three more times in 2025. They are predicted to end the year at 3.75 per cent, down from 4.5 per cent now.

The newfound expectation that interest rates will fall faster is feeding through into sonia swaps, an inter-bank lending rate which forecasts where mortgage rates will be in two or five years. Lenders use this to determine fixed-rate mortgage pricing.

Since the tariffs were announced, sonia swaps have been falling at some speed.

Sonia swaps falling: Fixed-rate mortgage pricing is largely based on Sonia swap rates – the inter-bank lending rate, based on future interest rate expectations

Five-year swaps were at 3.63 per cent and two-year swaps were at 3.66 per cent at the start of today, down from 3.97 per cent and 4.02 per cent respectively on the day of Trump’s announcement last week.

The expectation is that fixed mortgage rates could now follow suit if swaps remain where they are.

One mortgage lender to already respond to the change in sonia swaps is MPowered Mortgages.

It is cutting rates on its full range of fixed mortgage rates in response to the sharp fall in swap rates following President Trump’s tariff announcement. The rate cuts will be effective from 9am tomorrow.

Its lowest two-year fix will now start from 4.05 per cent with a £999 fee. These will be available to someone buying with at least a 40 per cent deposit.

Its lowest five-year fixed rates will now start at 4.14 per cent with a £999 fee.

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 UK economy 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 are now expecting more lenders to follow in what could see a wave of cuts over the coming weeks. 

Pete Mugleston, managing director at Online Mortgage Advisor told the news agency, Newspage: ‘With sonia swaps continuing to slide, we’re getting closer to seeing two and three-year fixed rates starting below 4 per cent. 

‘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.’

The cheapest five-year fix is currently 4.07 per cent and the cheapest two-year fix is 4.05 per cent. 

Riz Malik, independent financial adviser at R3 Wealth added: ‘We could see some really big cuts in fixed rate mortgage pricing this week. 

‘With house prices dipping according to Halifax and millions set to remortgage, a rate cut could spark much needed momentum in a hesitant market. 

‘It will take a brave lender to make the first big move on rates, but once one does, others may quickly follow.’