Mortgage rates in the UK have fallen below 4% for the first time in months following a wave of economic doubt triggered by U.S. President Donald Trump’s latest tariff announcements. The financial shifts have shaken global markets leading to investors stress and a shift in expectations and interest rates.
As returns on government loans (bonds) fell and experts expected lower interest rates several UK lenders quickly cut their mortgage rates to attract more customers and stay ahead of the competition.
Barclays and Coventry Lead the Way
Barclays has announced reductions in its mortgage offerings with some two- and five-year fixed-rate deals now available at 3.99% for borrowers with larger deposits. The bank stated that changing market conditions and the likelihood of a rate cut by the Bank of England were the main reasons for the decision.
Coventry Building Society followed Barclays launching a two year fixed rate mortgage at just 3.89% for customers able to put down a 35% deposit. Experts of industry say that such attractive rates have not been seen since 2023.
Economic Uncertainty Sparks Rate Shift
However, the surprise rate cuts are due to recent geopolitical uncertainty. President Trump’s surprise threat of fresh tariffs on significant European and Asian imports shook investors’ confidence. UK markets dropped and the return on government bonds (called gilt yields) went down.
There is now a 78% probability the Bank of England will reduce its base rate by 0.25 percentage points at its next meeting on May 8, analysts predict. This has reduced the cost of borrowing for banks and pressured many lenders to pass on those benefits to consumers in the form of lower mortgage rates.
Potential Mortgage Price War
The moves by Barclays and Coventry recently could be the beginning of a wider mortgage price war with other lenders to follow suit with their own rate cuts in the coming days.
It’s a race to the bottom,” said Sarah Coles, Hargreaves Lansdown head of personal finance. “Banks are eager to lock borrowers in while the market is trending especially those with large deposits who are less risky.”.
>Some analysts warn that the lower rates won’t last long depending on what economic data and policy events over the next few weeks are like.
What Should Borrowers Do?
The Mortgage rates are dropping rapidly. Financial Advisers are encouraging property buyers and those switching their mortgage deals to act quickly.
Additionally, people with variable or tracker mortgages might also gain if the base rate is cut but fixed-rate deals under 4% are a rare chance right now.
“If you’re in a position to lock in a deal now it might be wise to do so,” said Mark Harris, CEO of SPF Private Clients. “These are unusual circumstances and rates could bounce back just as quickly.”
