Mitchell Labiak, a business reporter for BBC News, reported that some lenders are planning to reduce rates on mortgages in response to the turmoil caused by US President Donald Trump’s tariff policies, which has raised expectations of further cuts in UK interest rates this year. TSB Bank announced that it will be cutting some two-year fixed rate mortgages by up to 0.25 percentage points, following MPowered Mortgages, which also lowered rates on several of its deals.
Financial markets and economists are anticipating that the Bank of England will make more than the previously expected cuts to interest rates this year in order to prevent an economic downturn. The Bank’s main rate is currently at 4.5%, and while it was initially projected to be reduced twice this year, the uncertainty stemming from US tariffs has resulted in a revised expectation of three cuts.
Sarah Coles, head of personal finance at Hargreaves Lansdown, mentioned that central banks, like the Bank of England, will likely aim to lower interest rates significantly to support economic growth. She noted that mortgage companies are already factoring this in, as demonstrated by the recent decrease in mortgage rates, with further reductions expected in the near future.
The average rates for two-year and five-year fixed mortgage deals remained unchanged on Tuesday, standing at 5.32% and 5.17% respectively, according to financial data company Moneyfacts. Despite this, experts predict that rates will decrease in the upcoming weeks, potentially reaching as low as 3.79% if swap rates stay consistent. It is important to note that the most competitive rates may not be accessible to all borrowers, especially first-time buyers, and could be accompanied by substantial fees. Additionally, homeowners transitioning from fixed-rate deals secured before the rise in interest rates in 2021 may still face higher mortgage rates. The Bank of England estimates that roughly a third of households will be seeking to renegotiate their mortgages within the next one to two years
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