President Donald Trump's robust approach to trade policy may prove to be a boon from the UK mortgage rate by forcing the Bank of England (BOE) to cut base rates even faster than expected this year.
The US administration's imposition of trade tariffs on other parts of the world is dizzy. Last month, Trump imposed a baseline tariff of 10% on more than 75 countries, including the UK, and higher charges than countries they thought there was an unfair trade balance, including 20% in the EU, 24% in Japan and 25% in South Korea. 
Less than two weeks later, however, the US president announced a 90-day suspension on most tariffs, more than 10%, as his administration is trying to negotiate bespoke deals with other countries.
While lower rates boost activity, it is balanced by broader concerns about the global picture
China is a notable exception. The US imposes 145% tariffs on most Chinese products, while China charges 125% on American imports.
The highest tariffs in almost 100 years from the world's largest importer are shaking the market. US investment bank JPMorgan has the potential to plunge into the US recession at 60% this year.
The BOE's Monetary Policy Committee said last month that the global economic environment had “deteriorated.”
“With the UK is an open economy with a large financial sector, global risk is particularly relevant to UK financial stability.”
The FTSE 100 is recovering, and currently has an increase of 2.1% over the same period, while the S&P 500 is down 6% annually as of the time of writing (starting the last week of April).
Chris Sykes, Technical Director of Private Finance, said: “The global stock price movement also affects the levels of deposits that potential buyers may have, and in addition, foreign exchange rates can affect the bargaining power of foreign buyers.”
We can participate in 3 rate reductions and just one rate cut
However, across the UK mortgage market, the impact of US tariffs has been a round of price reductions, along with major lenders such as Barclays, Coventry Building Society, HSBC, Santander and TSB, along with large lenders offering 4% mortgages. This was caused by calculations that the BOE's Monetary Policy Committee (MPC) could be forced to force two quarter base rate cuts in 2025, which the market had anticipated in January.
Aaron Strutt, director of Trinity Financial Product and Communications, said:
“This is when a reduction in the base rate could help reduce borrowing costs and provide a little more market confidence.”
Nicholas Mendes, technical manager for John Charcole, added: “There was a clear change in my emotions.
“On the other hand, the swap rate decline has already opened the door to more competitive mortgage pricing, which is encouraging for buyers. Some lenders are moving quickly to provide a 4% deal that has sparked interest between buyers and Remalt Gager.”
However, Mendes points out: “At the same time, a certain degree of tension is creeping up, people are unsure how safe their work is and what the broader economic outlook is.
Some clients are concerned about home prices, inflation and tariffs.
“So, lower fees help boost activities, but that's balanced by broader concerns about the global painting.”
The MPC is currently widely expected to cut rates at 4.5% for the fourth time since August 2024, when meeting on May 8th.
Goldman Sachs analyst James Morberley and Deutsche Bank's chief British economist Sanjay Raja predict four rate cuts in 2025.
Last month, Raja added that “stroke from tariffs” had dropped Deutsche Bank's UK growth forecast from 1% to 0.8% this year.
German banks also expect the UK's inflation rate of now at 2.6% to reach 3.6% later this year as employment slows and the likelihood of cheaper goods imported from China is offset by rising energy prices and hikes in employers' national insurance.
Jenni Brown, the business development director for mortgage finance brokers, estimates that central bank policymakers will be cautious.
She said:
Forex rates can affect the bargaining power of foreign buyers
“Trump is likely to move his tariffs and the MPC is about to respond in May, but there is a possibility that many changes will be possible over the course of the year.”
Mendes adds that brokers will study the risks of lender pipeline exposure. He says this is “the borrowers are trying to switch to other products in the middle of the mortgage process to access better deals.”
However, global trade policies are driving the mortgage market even when you don't know the script.
This article was featured in the May 2025 Mortgage Strategy Edition.
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