Mortgage Rates Fall Amid Economic Uncertainty: Impact of US Trade Tariffs

Several UK mortgage lenders have started reducing rates, driven by growing expectations that the Bank of England will introduce sharper interest rate cuts this year in response to economic jitters sparked by US trade tariffs. This shift is leading to mortgage rate reductions in the UK in 2025, as lenders adjust to anticipated economic changes and the potential for more aggressive actions from the Bank of England.

Coventry Building Society’s Key Move

Coventry Building Society has made the most significant move by lowering its two-year fixed mortgage rate below 4%, making it one of the first major lenders to respond to shifting market sentiment. This change places it alongside several other lenders adjusting their mortgage offerings

Bank of England’s Potential Rate Cuts

Economists and traders are now predicting that the Bank of England will introduce more aggressive interest rate cuts this year due to:

• The potential economic fallout from US President Donald Trump’s reintroduction of broad trade tariffs, which affect imports from over 60 countries.
• Growing concerns about a potential global economic slowdown.

Mortgage Rates Overview

The average two-year fixed mortgage rate in the UK has decreased to 5.3%, while the five-year fixed rate is now down to 5.15%. For example, Coventry’s updated two-year fixed rate stands at 3.89% until October 2027. However, this is available only to borrowers with a 65% loan-to-value ratio and includes a £999 fee. These reductions reflect the changing economic conditions and growing expectations that the Bank of England may lower interest rates in the coming months.

Other Lenders Follow Suit

Several other lenders, including Clydesdale Bank, Newcastle Building Society, and the Co-operative Bank, have also reduced their rates. Lenders like TSB, Metro Bank, and Bank of Ireland have followed suit, signalling potential for more rate cuts as the market adapts to the current uncertainty.

Further Rate Cuts Expected

Mortgage brokers predict further rate cuts, especially if UK’s largest lenders — such as Halifax, Nationwide, HSBC, Santander, Lloyds, and NatWest — begin to adjust their offerings more significantly. Economists forecast up to four rate cuts from the Bank of England this year, which could lead to more mortgage rate reductions in the UK in 2025.

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