Lenders are set to cut rates on mortgages after turmoil from US President Donald Trump's tariff policy raised expectations that UK interest rates could be cut further this year.
Financial markets and economists are predicting that the Bank of England will cut interest rates by more than expected this year to avoid an economic downturn.
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 that the Bank of England will respond with interest rate cuts.
The market had been pricing in two interest rate cuts this year, but in short order that has now been ratcheted up to three, which would take the base rate to 3.75% by the end of 2025 (based on LSEG data). The two-year gilt yield has also fallen, from 4.2% to 3.9% since 1 April.
We may therefore see falling interest rates feeding into mortgage pricing before too long. Likewise the cash market may see fixed rates fading to reflect the new outlook for interest rates.
