As US tariffs continue to impact the global economy, UK mortgage lenders are following suit by cutting rates in a bid to mitigate risk and encourage spending. With economists predicting four rate cuts over the next 12 months, borrowers can expect even more competitive deals on the horizon.
A growing number of UK lenders have cut their mortgage rates in response to the ongoing impact of US tariffs. The move is seen as a signal that the Bank of England may reduce borrowing costs this year to mitigate the risk of global economic instability.
Rate Cuts and Market Predictions
Coventry Building Society became the largest lender to trim its two-year fixed rate mortgage below 4% on Wednesday, joining several other lenders who made similar moves. ‘Financial markets and economists predict that the Bank of England will reduce borrowing costs by more than expected this year to avoid a downturn.’ The average two-year fixed mortgage rate has ticked down to 5.3%, while the average five-year fix has edged lower to 5.15%.
Lender Response and Market Volatility
The product cuts are largely driven by demand for shorter-term flexibility in an uncertain market. However, borrowers who come off fixed deals signed before interest rates started rising in mid-2021 may face more expensive loans when they refinance. Around 1.3 million homeowners will see their existing fixed-rate deals end between April and December this year.
Further Rate Cuts Expected
Brokers expect further falls in the coming days as the ‘Big Six’ lenders continue to adopt a ‘wait and see’ approach by not announcing any cuts yet. When they do drop rates, other lenders tend to follow. Central banks cut interest rates in response to concerns of an economic downturn in the hope that cheaper borrowing will encourage more spending.
Key Players and Market Insights
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Coventry Building Society has lowered its two-year fixed rate deal to 3.89% for borrowers with a 65% loan-to-value.
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Clydesdale Bank and Newcastle Building Society have also cut their rates.
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The ‘The Co-operative Bank’ is set to reduce its two-year, three-year, and five-year fixed rates on certain purchase mortgages by 0.14 percentage points.
Coventry Building Society is a UK-based mutual organization that provides financial services to its members.
Founded in 1864, it has been serving the community for over 150 years.
The society offers a range of products including 'mortgages, savings accounts, and insurance.'
With a strong focus on member satisfaction, Coventry Building Society has received numerous awards for its customer service and financial stability.
The UK mortgage market is closely watching the Bank of England’s response to the US tariffs fallout. With economists predicting four rate cuts over the next 12 months, lenders are responding to the changing economic landscape.
