Mortgage Lenders Reduce Rates Amid Economic Uncertainty
In a bid to keep the housing market buoyant amid mounting global economic tensions, several UK mortgage lenders have started slashing fixed-rate mortgage offers. The move comes in direct response to growing uncertainty triggered by international trade tensions — notably former U.S. President Donald Trump's recent imposition of steep tariffs on Chinese and European imports.
One of the first lenders to act is MPowered Mortgages, which has announced a reduction across its two, three, and five-year fixed-rate products. Industry analysts believe this is just the beginning, with more lenders expected to follow suit in the coming weeks.
The cuts come amid widespread speculation that the Bank of England may reduce the base interest rate in the coming months, potentially as early as the next Monetary Policy Committee (MPC) meeting. With inflation moderating and concerns rising over global financial stability, the Bank is considering options to stimulate domestic borrowing and investment.
These mortgage rate reductions aim to pre-emptively attract new borrowers and entice existing homeowners to refinance, creating more movement in what has become a cautious and hesitant housing market.
The backdrop includes:
US trade tariffs and retaliatory risks slowing global trade and increasing financial market volatility
A cooling UK housing market, with Halifax reporting a 0.5% drop in house prices in March
Increasing signs that both consumer and business sentiment are wavering, especially among first-time buyers affected by recent stamp duty changes
A need for lenders to remain competitive in a crowded market
The average two-year fixed mortgage is now hovering around 5.3%, with some lenders dropping below the 5% threshold for higher-deposit borrowers.
For potential homebuyers or those nearing the end of their fixed term, this could be a prime window of opportunity. Locking in a lower fixed rate now, especially before any potential rise in lender margins, could mean thousands of pounds in savings over the term of the loan.
However, mortgage brokers caution that lenders are becoming increasingly selective, favoring borrowers with stronger credit histories, stable income, and larger deposits.
The situation remains fluid. If the Bank of England follows through with a rate cut — or even signals one clearly — we could see a mini mortgage rate war emerge, especially among smaller and digital-first lenders seeking to expand market share.
Conversely, if inflation ticks upward again or economic confidence unexpectedly rebounds, lenders may quickly reverse course and adjust rates back upward.
Takeaway for Property Professionals
Buyers: Now is a good time to explore fixed-rate offers while rates are competitive.
Investors: Lower borrowing costs could improve yield calculations, especially in areas with solid rental demand.
Brokers and advisors: Expect a spike in mortgage enquiries and refinancing interest in Q2.