TSB is among the multiple lenders that have announced cuts at the start of this week.
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Smaller lenders Gen H and Pepper have announced cuts of up to 0.2 and 0.4 percentage points, respectively.
Last week, mortgage experts predicted that banks would start to cut their rates, following the fallout from President Trump’s Rose Garden press conference in which he announced that the US would apply import taxes on products coming into the country from around the world.
The predictions mean swap rates, used by mortgage lenders to determine the price of their fixed mortgages, have fallen.
None of the reduced rates will overtake the cheapest on the market, but reductions from lenders also often prompt other lenders to do the same.
“Looking at where swaps have gone, you’d assume the big six lenders would be jumping in with rate cuts. However, I suspect, due to the volatility in global markets, they’re biding their time until there’s more clarity on how the Trump trade war plays out,” said Lewis Shaw of Shaw Financial Services.
“In the UK, the impact has been particularly pronounced on swap rates. For example, the two-year swap rate dropped from 4.38 per cent to 3.79 per cent in just a few days, and similar movements were seen in gilt yields. These are critical benchmarks for mortgage pricing.”
Although mortgage rates are dropping, which is usually positive news for households, the backdrop to why it is happening is in this case gloomy.
Higher interest rates weigh down further on the economy because – among other things – it makes borrowing for businesses and individuals more expensive, which means they are even less likely to spend cash.
So while mortgage rates dropping is a silver lining to what is being seen in the US, it’s hard to see them as good news in isolation, given the context that has caused them.
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