Are Trump tariffs set to drive down mortgage rates?
Hi one mortgage lender this morning messaged journalists saying the tariffs would reduce mortgage rates because swaps are coming down.
Is this the NewsPage community's experience?
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SONIA swap rates have come down significantly since the markets reacted to Trump's tariffs. Lenders are no doubt waiting for the dust to settle and to see if these lower rates will be sustained or are just a short-term blip before re-pricing all their products. Therefore, so far only Coventry Building Society have announced reductions are coming, but have not yet given the detail. No doubt if swap rates remain at current lower levels or drop further it is only a matter of time before the fixed mortgage rates available follow suit, along with additional pressure on the Bank of England to reduce the base rate to assist with the economic fall out from the tariffs.
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We're seeing swap rates fall, and tariffs are partly driving that by increasing global economic uncertainty. Markets are now pricing in more UK rate cuts, which is feeding through to cheaper funding costs for lenders. While not all have passed on the reductions yet, we’re expecting more competitive fixed rates soon, especially in the 2- and 3-year space. So yes, the link between tariffs, swaps, and lower mortgage rates is playing out in real time.
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Since Trump's Tariffs were announced, we have seen SWAP rates fall across the board, which could mean that lenders can reprice their mortgage products downwards. We could well see mortgage rates starting with a 3 once more. Much depends on the length of time Trump holds his current position, and the erratic nature of decisions coming from Washington means that the market will remain capricious. Lenders may, therefore, be reluctant to move too quickly and adopt a wait-and-see approach. Whilst these rate cuts may be a blessing for many with a mortgage or looking to buy, it reflects the expectation of a weaker economy and less growth due to the trade wars, which could result in a declining jobs market and certain companies holding future recruitment plans or laying off workers which will be a concern. The other side of this is the clear inflationary forces that Tariffs encourage, although markets seem to suggest they are more worried about economic threats than inflationary pressures.
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Trump might just have done UK borrowers a favour!
Since Liberation Day, swap rates have dropped, and that’s the key ingredient for cheaper fixed-rate mortgages. We’re already seeing some early signs of lenders sharpening their pencils, and if the momentum continues, cuts could come thick and fast. While borrowers won’t see a dramatic overnight change, the direction of travel is promising. Ironically, Trump's chaos abroad could mean savings at home – at leat for mortgage holders.
Since Liberation Day, swap rates have dropped, and that’s the key ingredient for cheaper fixed-rate mortgages. We’re already seeing some early signs of lenders sharpening their pencils, and if the momentum continues, cuts could come thick and fast. While borrowers won’t see a dramatic overnight change, the direction of travel is promising. Ironically, Trump's chaos abroad could mean savings at home – at leat for mortgage holders.
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If Sonia swap rates are anything to go about then it looks like we may see some rate reductions in the very near future. Trump believes that the markets will self correct themselves but i think Trump may be too optimistic with this and i think his stubbornness will be his downfall. Canada bold energy move with China and Europe has really tightened the screw on Trumps tenure and what was originally perceived as a patriotic move to make America Great again has backfired and unified the entire Globe and give nations a belief that they can actually survive without the star spangled banner. In the meantime, we can look forward to rate reductions and if you are due to remortgage or looking at purchasing a new property, then now is the time to take advantage of Trumps actions
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One thing we can all agree is that this situation is very complex. A single comment by Trump could send things moving the other way, and there’s no way to know for sure what will come next. The consensus seems to be that central banks will need to stimulate growth in the coming weeks and months – but there will certainly be second and third order impacts as negotiations commence. As a lender, we can’t predict the future, but we will keep making hay while the sun shines – that is, cutting rates wherever we can responsibly do so.