BBC News business reporter, Mitchell Labiak, reports that UK lenders are taking action by cutting mortgage rates amidst the fallout from US tariffs, leading to predictions of deeper interest rate cuts than initially expected. Coventry Building Society made headlines by slashing its two-year fixed rate below 4% on Wednesday, setting off a wave of rate cuts across the industry.
Experts and financial markets are anticipating more significant interest rate cuts by the Bank of England this year in an effort to steer the economy away from a potential downturn. Lenders are adjusting to these projections, with swap rates, used to price loans, dropping below 4% on Wednesday. The financial data company Moneyfacts indicates a decrease in the average two-year fixed mortgage rate to 5.3% from 5.32% just a day prior, with the average five-year fixed rate falling from 5.17% to 5.15%.
TSB Bank, Metro Bank, and Bank of Ireland have followed suit by cutting their rates this week, with Coventry Building Society reducing its two-year fixed rate to 3.89% until October 2027. However, this offer is exclusive to borrowers with a 65% loan-to-value ratio and comes with a £999 fee. The Co-operative Bank is also set to lower its rates on select purchase mortgages by 0.14 percentage points on Thursday, suggesting a potentially ongoing trend in falling rates.
Market analysts forecast further rate declines in the near future, especially as major lenders like Halifax, Nationwide, HSBC, Santander, Lloyds, and Natwest have yet to announce any cuts, adopting a cautious approach. The ripple effect of rate cuts from these prominent lenders is expected to prompt others in the industry to follow suit. Central banks globally are reducing interest rates to stimulate spending in the face of economic uncertainties, with economists now projecting four Bank of England rate cuts within the next year, up from an initial estimate of two
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