Many of the largest mortgage lenders have cut fixed rates below 4 per cent as the fallout from President Trump’s global tariffs continues to impact borrowing costs.
Halifax and NatWest cut mortgage rates by up to 0.19 percentage points on Tuesday, as both released two-year fixed rates at 3.94 per cent for homebuyers.
Nationwide is to cut fixed rates by up to 0.25 percentage points on Wednesday, after Santander and Yorkshire Building Society (YBS) had previously cut rates below 4 per cent last Thursday.
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Nationwide has the lowest available two-year fix, which is 3.89 per cent at up to 60 per cent loan-to-value, down from 4.25 per cent at the start of February.
Lenders including Halifax and HSBC have also said they are reducing the stress-test rates they check borrowers against to ensure they would still be able to afford their loans if interest rates were to rise, making it easier to take out larger loans.
HSBC, which reduced its stress rate from Tuesday, said it would allow 20,000 more people to get a mortgage and first-time buyers to borrow £39,000 more on average. Banks have been urged by the Financial Conduct Authority and the Treasury to be more flexible with their mortgage lending, which the government hopes will boost economic growth.
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Aaron Strutt, from the mortgage broker Trinity Financial, said: “Lenders are clearly trying to get the property market moving again, especially now that they have been given the green light to offer more generous loan sizes by the government.
“Many of the new sub-4 per cent rates are available to those buying a home rather than remortgaging, which makes sense now stamp duty is so much more expensive for many. Mortgage affordability really is a huge issue for many borrowers so the combination of cheaper rates and more generous loan sizes is positive news.”
There is a growing expectation that the Bank of England will need to cut interest rates to stave off an economic downturn
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From April 1 the threshold at which buyers pay stamp duty fell from £250,000 to £125,000, and from £425,000 to £300,000 for first-time buyers.
Strutt said there had also been a “Donald Trump effect” that had lowered borrowing costs. The announcement of blanket 10 per cent tariffs and far higher US tariffs on Chinese imports, which could be imposed on other countries if they are unable to negotiate exemptions within 90 days, has led investors to worry about a global recession.
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This has led to growing expectations since Trump’s “Liberation Day” announcement on April 2 that the Bank of England will need to cut interest rates further from 4.5 per cent to stave off an economic downturn. Fixed mortgage rates are based on swap rates — market expectations of the future Bank rate — so they have followed suit.
Peter Stimson, from the lender MPowered Mortgages, said: “The two-year swap rate has fallen by 0.3 percentage points in the chaotic three weeks since Donald Trump’s tariffs announcement. While the biggest lenders have been slow to react, we’ve now seen a wave of rate cuts ripple across most of the mortgage market. That first wave is unlikely to be the last.”
President Trump’s announcement of tariffs prompted fears of a global recession
MARK SCHIEFELBEIN/AP
Halifax, NatWest, Santander and YBS all have two-year fixes available for lower rates than five-year deals for the first time in three years. The lowest five-year fix is 3.89 per cent from Nationwide at up to 60 per cent loan-to-value for someone buying a home.
Before 2022 it was normal for borrowers to pay more to fix for longer, but shorter fixes started to become more expensive once the Bank rate started to be hiked from an all-time low of 0.1 per cent in December 2021 as the Bank tried to tackle soaring inflation, which was expected to be temporary.
This peaked at 11.1 per cent in the year to October 2022 and fell to 2.6 per cent in March. The Bank rate rose to a 15-year high of 5.25 per cent in August 2023 and has been cut three times since last year.
