Yesterday, President Donald Trump announced a raft of tariffs against several countries by executive order, with the UK among those receiving a 10% baseline tariff on all exports to the US. There is also a 25% global tariff on cars.
This is set to come into effect on 5 April, with some higher duties applied to other countries slated for 9 April.
Prime Minister Keir Starmer said he is taking a “calm approach” and that there are ongoing talks for a deal with the US, which was making “good progress”.
The Department for Business and Trade has invited UK companies to input their views on what the future UK response should be, the average value of US imports, the impact of any possible UK tariffs and how they would adjust. It has brought out a 417-page list of US goods that could be subject to tariffs.
Steve Cox, chief commercial officer at Fleet Mortgages, said: “The day after the tariff announcement – and as I write, we’ve seen five-year swap rates down to 3.85%, so there’s been an immediate impact here, which could clearly precipitate cuts to mortgage product pricing.
Friend or foe? The role of AI in mortgage administration
Sponsored by Pepper Money
“In terms of bank base rate, there is already speculation that, in order to counteract the negative impact of the tariffs on UK businesses, it might act as a catalyst for the Bank of England Monetary Policy Committee to cut rates sooner and multiple times throughout the course of the year and beyond. Again, from a mortgage product pricing perspective, that would be positive for lenders, advisers and their clients.”
Simon Jackson, managing director of SDL Surveying, said currently it was “a difficult call to make regarding how this all plays out”, as markets are uncertain on the global impact on trade, so there has been a “period of uncertainty”.
He continued: “Although stock markets have reacted over the last few weeks, swap rates have been fairly stable, at least for swap rates.
“Today, in the immediate aftermath of the tariffs announcement, we have seen a fairly large fall in swap rates. The good news here is that if this can be sustained, it should provide latitude for lenders to reduce mortgage rates further, which would clearly be welcome news for all, given that falling rates tend to increase demand and activity.
“If we do get an immediate volume increase when rates fall, that can only be positive for the housing and mortgage markets.”
Bank of England faces ‘dilemma’ on interest rates in the post-tariff era
Karen Noye, mortgage expert at Quilter, said that tariffs, by their nature, tend to “push up prices”.
She explained: “When the cost of imported goods rises, inflationary pressures often follow. In the US, this could prompt the Federal Reserve to either raise interest rates or keep them higher for longer, particularly if markets begin to price in a more protectionist and inflationary economic outlook under a second Trump presidency.
“That matters for UK mortgages because global financial markets are tightly interconnected. US monetary policy heavily influences bond yields across developed economies. If US Treasury yields rise on the back of inflation fears, UK gilt yields could move higher in tandem. That in turn would push up swap rates, which are the key benchmark that underpins the cost of fixed rate mortgages in the UK.”
Noye said the Bank of England “might not immediately respond”. However, lenders may still face “higher funding costs”, leading to “more expensive mortgage products”.
“In short, international politics and trade decisions – especially from the US – can and often do filter through to households here, affecting everything from remortgaging costs to first-time buyer affordability,” she said.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said modelling the impact with “so many unknowns is always tricky”.
“There’s a risk that inflation is imported from the US and around the world, which would mean the Bank of England keeps interest rates higher for longer, which would mean more expensive mortgages. However, right now, the market doesn’t think this will be the Bank of England’s biggest worry. It’s assuming that all these tariffs hit global trade, putting the Bank of England under pressure to cut rates to support growth, so it’s pricing in more cuts.
“The uncertainty means that if you have a remortgage looming, it’s well worth shopping around for a deal as early as possible. If rates rise between now and when you need to remortgage, you’ll have locked in a cheaper deal, and if they fall, you can track down something more competitive,” she said.
Jason Hollands, managing director of wealth management firm Evelyn Partners, said interest rates could “‘potentially go either way” as a result of this “tariff bombshell”, so the knock-on effect on the rates that banks charge on mortgages is “very uncertain”.
“It would be easy to assume that the possible inflationary impact of the tariffs means that interest rates will stay higher for longer. But that might not be the case.
“We can be very sure that this will be bad for the stumbling UK economy at a time when households are struggling with higher taxes and increased bills, but what we don’t know yet is how either the government or Bank of England will choose to respond,” he said.
Hollands noted that the Bank of England will “face a dilemma” as, on one hand, tariffs will lift the prices of some goods and its core remit is to curb inflation, so rates could stay higher for longer. On the other hand, the Bank of England will want to support the economy from “shrinking into recession.”
“It is quite possible that they will regard price spikes related to the implementation of tariffs as a one-off shock and focus more on the risk of economic stagnation.
“It’s not unthinkable that we will actually see interest rates come down more rapidly than expected. Of course, any serious hit to UK economic growth could be felt in the jobs market, not just in terms of job insecurity but also in that firms suffering uncertainty – as well as the tax rises already in effect – could restrict wage and salary growth,” Hollands said.
He noted that mortgage rates tend to be influenced by bond yields as well as the Bank of England base rate.
“Global economic uncertainty can cause bond market volatility, so that’s an added variable that could swing mortgage rates. But the key outcome here is whether central banks – the Federal Reserve, the Bank of England and the European Central Bank – react to any inflationary effects by hiking rates, or whether they overlook short-term and possibly one-off price rises to look at the real economy and potentially even cut rates more than is currently expected,” Hollands said.
Potential upside for rental markets and overseas purchases
Luther Yeates, head of mortgages at Orton Financial, said there could be a potential upside for the property market as it “remains a resilient asset class during periods of uncertainty”.
He explained that during the pandemic, despite predictions to the contrary, UK property prices “surged to record highs after an initial period of stagnation”.
“What’s more, house prices continued to soar into 2023, outpacing growth in previous years. If inflation remains elevated due to tariffs, we could witness something similar in the coming months.
“Of course, higher mortgage rates present challenges for many people. But for investors, they present a significant opportunity. Rising mortgage costs are pushing more potential buyers toward renting. With more would-be buyers staying in the rental market, demand for rental properties will likely climb even further. Investors who position themselves well now could see strong returns in the coming year,” Yeates added.
He added that this could also be “good news” for those looking to buy abroad, as the pound has strengthened against the dollar, so it is a “good time to remortgage or release for an overseas purchase”.
Source: Octane Capital as of 3 April 4:45 pm
|
GBP 1 Year IRS Interest Rate Swap
|
|
|
Date
|
Price
|
|
Mar 03, 2025
|
4.303
|
|
Mar 04, 2025
|
4.285
|
|
Mar 05, 2025
|
4.321
|
|
Mar 06, 2025
|
4.311
|
|
Mar 07, 2025
|
4.294
|
|
Mar 10, 2025
|
4.279
|
|
Mar 11, 2025
|
4.262
|
|
Mar 12, 2025
|
4.293
|
|
Mar 13, 2025
|
4.279
|
|
Mar 14, 2025
|
4.283
|
|
Mar 17, 2025
|
4.29
|
|
Mar 18, 2025
|
4.286
|
|
Mar 19, 2025
|
4.295
|
|
Mar 20, 2025
|
4.339
|
|
Mar 21, 2025
|
4.341
|
|
Mar 24, 2025
|
4.352
|
|
Mar 25, 2025
|
4.373
|
|
Mar 26, 2025
|
4.321
|
|
Mar 27, 2025
|
4.319
|
|
Mar 28, 2025
|
4.282
|
|
Mar 31, 2025
|
4.282
|
|
Apr 01, 2025
|
4.279
|
|
Apr 02, 2025
|
4.267
|
|
Apr 03, 2025
|
4.173
|
|
Est 1 day change
|
-2.2%
|
|
GBP 5 Year IRS Interest Rate Swap
|
|
|
Date
|
Price
|
|
Mar 03, 2025
|
4.187
|
|
Mar 04, 2025
|
4.152
|
|
Mar 05, 2025
|
4.271
|
|
Mar 06, 2025
|
4.251
|
|
Mar 07, 2025
|
4.226
|
|
Mar 10, 2025
|
4.217
|
|
Mar 11, 2025
|
4.215
|
|
Mar 12, 2025
|
4.283
|
|
Mar 13, 2025
|
4.243
|
|
Mar 14, 2025
|
4.233
|
|
Mar 17, 2025
|
4.229
|
|
Mar 18, 2025
|
4.232
|
|
Mar 19, 2025
|
4.235
|
|
Mar 20, 2025
|
4.271
|
|
Mar 21, 2025
|
4.294
|
|
Mar 24, 2025
|
4.303
|
|
Mar 25, 2025
|
4.342
|
|
Mar 26, 2025
|
4.306
|
|
Mar 27, 2025
|
4.328
|
|
Mar 28, 2025
|
4.245
|
|
Mar 31, 2025
|
4.236
|
|
Apr 01, 2025
|
4.215
|
|
Apr 02, 2025
|
4.216
|
|
Apr 03, 2025
|
4.036
|
|
Est 1 day change
|
-4.3%
|
|
FTSE 100
|
|
|
Date
|
Price
|
|
Mar 03, 2025
|
8,871.31
|
|
Mar 04, 2025
|
8,759.00
|
|
Mar 05, 2025
|
8,755.84
|
|
Mar 06, 2025
|
8,682.84
|
|
Mar 07, 2025
|
8,679.88
|
|
Mar 10, 2025
|
8,600.22
|
|
Mar 11, 2025
|
8,495.99
|
|
Mar 12, 2025
|
8,540.97
|
|
Mar 13, 2025
|
8,542.56
|
|
Mar 14, 2025
|
8,632.33
|
|
Mar 17, 2025
|
8,680.29
|
|
Mar 18, 2025
|
8,705.23
|
|
Mar 19, 2025
|
8,706.66
|
|
Mar 20, 2025
|
8,701.99
|
|
Mar 21, 2025
|
8,646.79
|
|
Mar 24, 2025
|
8,638.01
|
|
Mar 25, 2025
|
8,663.80
|
|
Mar 26, 2025
|
8,689.59
|
|
Mar 27, 2025
|
8,666.12
|
|
Mar 28, 2025
|
8,658.85
|
|
Mar 31, 2025
|
8,582.81
|
|
Apr 01, 2025
|
8,634.80
|
|
Apr 02, 2025
|
8,608.48
|
|
Apr 03, 2025
|
8,471.34
|
|
Est 1 day change
|
-1.6%
|
|
Euro Stoxx 50
|
|
|
Date
|
Price
|
|
Mar 03, 2025
|
5,540.69
|
|
Mar 04, 2025
|
5,387.31
|
|
Mar 05, 2025
|
5,489.12
|
|
Mar 06, 2025
|
5,520.47
|
|
Mar 07, 2025
|
5,468.41
|
|
Mar 10, 2025
|
5,386.98
|
|
Mar 11, 2025
|
5,309.90
|
|
Mar 12, 2025
|
5,359.42
|
|
Mar 13, 2025
|
5,328.39
|
|
Mar 14, 2025
|
5,404.18
|
|
Mar 17, 2025
|
5,445.55
|
|
Mar 18, 2025
|
5,485.01
|
|
Mar 19, 2025
|
5,507.36
|
|
Mar 20, 2025
|
5,450.93
|
|
Mar 21, 2025
|
5,423.83
|
|
Mar 24, 2025
|
5,415.79
|
|
Mar 25, 2025
|
5,475.08
|
|
Mar 26, 2025
|
5,411.69
|
|
Mar 27, 2025
|
5,381.08
|
|
Mar 28, 2025
|
5,331.40
|
|
Mar 31, 2025
|
5,248.39
|
|
Apr 01, 2025
|
5,320.30
|
|
Apr 02, 2025
|
5,301.35
|
|
Apr 03, 2025
|
5,114.65
|
|
Est 1 day change
|
-3.5%
|
