Mortgage charges drop beneath 4% as extra rate of interest cuts predicted for this yr

The lowest mortgage rates have dropped below 4 per cent in what has been described as a ‘golden window of opportunity’ for homeowners. 

Markets are now expecting there to be four Bank of England interest rate cuts by the end of the year. 

This would see the base rate fall from 4.5 per cent to 3.5 per cent, amid fears that a trade war could damage economic growth.

Prior to Trump’s so-called ‘liberation day’ last week, markets were forecasting just two further interest rate cuts this year.

The shift in interest rate expectations is expected to feed through into Sonia swaps, the 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.

On 9 April, five-year swaps are at 3.76 per cent and two-year swaps were at 3.74 per cent. At the start of last week these were both above 4 per cent.

Coventry Building Society has also released a new best-buy two-year fix below 4 per cent.

Downward movement: Coventry Building Society followed MPowered Mortgages in cutting rates in response to Sonia swaps rates falling

Its 3.89 per cent two-year fix comes with a £999 fee. On a £200,000 mortgage being repaid over 25 years, that would equate to paying £1,044 a month.

The deal is available to those buying a property with at least a 35 per cent deposit.

There is also a five-year fixed rate option at 4.03 per cent, with a £999 fee. The next best deal on the market is offered by Nationwide at 4.07 per cent.  

Coventry’s cuts follow on from MPowered Mortgages, which also cut rates across all of its products yesterday.

Babek Ismayil, chief executive and founder of homebuying platform OneDome believes the changes by Coventry could be the first sign of a new price war among lenders, which could open up a ‘window of opportunity’ for borrowers.

‘With Trump’s tariffs now taking effect and global markets reacting nervously, uncertainty is pushing down the cost of borrowing, and mortgage holders may be unexpected winners from the turmoil,’ said Ismayil.

‘Coventry might be leading the charge, but they certainly won’t be the last. If this trend continues, we could see more lenders cutting rates in the days and weeks ahead. 

Expert: Nicholas Mendes, mortgage technical manager at broker John Charcol

‘For homeowners looking to remortgage or secure a better deal, this could be a golden window of opportunity.’

Nicholas Mendes, mortgage technical manager at John Charcol, added: ‘The sharp fall in swap rates, triggered by investor flight from risk, should create immediate downward pressure on mortgage pricing. 

‘MPowered Mortgages and Coventry Building Society have been quick out of the gate with rate cuts, and it is hard to imagine others will not follow.’

However, Chris Sykes, technical director at mortgage broker Private Finance, said lenders may be reluctant to reduce rates too quickly because those who have already agreed mortgage deals, but not completed them, may try to jump to lower rates. 

”Anything that lenders have written over the past few weeks will be at higher rates, which means there is a risk that people secured on these higher rates will jump to the lower rates on offer,’ he said. 

‘Lenders could end up losing money on some of the mortgage deals they have already underwritten.

‘It means some lenders may not pass on reductions quite as quickly or dramatically as some might expect or hope for.

‘Lenders will also be taking into account the risk that Trump could just change his mind on tariffs, or agreements will be made.’