In a historic move that has caused shockwaves throughout the global financial scene – with FTSE 100 falling by 9.88% in a single week, the steepest decline in over five years – President Trump recently announced sweeping import tariffs on nearly all its trading partners. The UK is included on the list of countries now subject to tariffs. A 10% tariff is now charged to British exports coming into the US. Considering that the US is the UK’s largest export partner at 16.1% of all British export trade, this decision taken by Washington is going to have a noticeable impact on the British economy.
Interest Rates
Mike Staton, director of Staton Mortgages, argues that ‘while Trump’s actions may appear to be damaging the global economy, he may be single-handedly rescuing the UK housing market’. One of the benefits industry experts identify is interest rates will fall at a much quicker rate. This is aimed at offsetting the impact of the US’s global tariff agenda by encouraging domestic activity.
Responding to the industry speculation over the consequences of the US’s global tariff agenda, Charlie Bean, former deputy governor of the Bank of England, has urged the reduction of interest rates by half a percentage point in the next Bank of England committee meeting on 8 May. Bean argues that ‘the tariff situation is not of the same magnitude [as the 2008 Financial Crisis] but this is a disinflationary shock and an event that the bank should react to, and react very strongly’.
Instead of two rate reductions over the course of 2025, SONIA swaps are now forecasting that the Bank of England is going to reduce interest rates three times over this year. Furthermore, interest rates are expected to fall from 4.5% to 3.75% by the end of the year. Such a forecast is welcoming news, for it should ease some of the financial burden and facilitate more homebuyers into acquiring property.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said that the Bank of England ‘will be really looking to cut interest rates as much as possible in order to support growth’, adding that ‘we should be see[ing] plenty of that in the coming days’.
Mortgage Schemes
Another area expected to be affected by the tariffs is fixed mortgage rate schemes. As a way to encourage further economic activity, MPowered Mortgages has lowered many fixed-rate mortgages for customers. For two-year fixed mortgages, MPowered Mortgages is now offering reduced rates starting at 4.05% at 60% LTV with a £999 fee and at 4.29% with no fee. Additionally, MPowered Mortgages is offering five-year fixed rates starting at 4.14% at 60% LTV with a £999 fee and at 4.28% with no fee.
Stuart Cheetham, CEO of MPowered Mortgages, argues that 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’.
Other mortgage lenders are also following suit. Nationwide recently announced that it will be reducing its buy-to-let mortgage rates by 0.10%, with a two-year fixed rate (remortgage only) now starting at 4.34% with a £1,495 fee, available up to 65% LTV. Similarly, TSB will reduce rates on numerous mortgage schemes by up to 0.25%. Not far behind is Gen H slated to reduce mortgage rates by up to 0.20%. In one of the steepest reductions found across the mortgage market, Pepper Money intends to reduce certain mortgage rates by up to 0.40%.
Henry Goodliffe, director of HTC Mortgages, argues that these reductions are ‘more than just market noise’. ‘If this momentum sticks’, Goodliffe said, ‘we could see a wave of reductions from bigger lenders, too. Borrowers may want to keep their eyes peeled — what looks like a short-term blip could quickly turn into a golden window’.
Key Takeaways
In response to the economic ramifications of the US’s tariff policy, it is widely expected among industry experts that interest rates will be declining at a much faster rate than previously expected. Increasing pressure is now mounting on interest rate reductions to incentivise domestic activity and participation in the housing market, which continues to perform well despite the base rate reductions in stamp duty and increases in landlord expenditure.
There is a silver lining – the UK housing market should remain resilient over the coming year. Although it remains to be seen to what extent the US’s tariffs will impact the British economy, these tariffs are expected to encourage lower interest rates and more preferable mortgage schemes, two aspects industry leaders and consumers have been wanting for some time. It may therefore stimulate further activity in the UK housing market.
Considering the ongoing fast movements occurring on the international stage, it is vital to keep well-informed on the present financial situation, for these are going to influence the pace and scale at which interest rates fall.
