Lenders could launch a mortgage price war as soon as this week after borrowing costs fell to their lowest level since the days leading up to Liz Truss’s disastrous mini-Budget.
Interest rate swaps – which factor in predictions for future borrowing costs and are used to price fixed-rate mortgages – have dropped substantially since the president announced his sweeping “liberation day” tariffs.
Two-year swaps, which are more closely linked to near-term interest rate expectations, fell as low as 3.64pc on Monday to their lowest since August 2022, before Ms Truss became prime minister.
This is down from above 4pc before the president’s speech on April 2.
Five-year swap rates, which are used to price longer deals, have also fallen sharply in recent days. Mortgage brokers said sub-4pc rates for buyers with large deposits could soon become the norm.
Coventry Building Society announced mortgage cuts over the weekend, sparking speculation that this could be a start of a new mortgage price war that will potentially shave hundreds of pounds off annual payments.
Digital lender MPowered Mortgages also cut its deals by up to 0.21pc, and will offer rates of 4.04pc for those with a 40pc deposit from Tuesday.
Ray Boulger, of mortgage broker John Charcol, said: “I think we’ll certainly see a raft of lenders cutting rates over the course of the next week or two.
“Some of the big lenders have been taking more than a week before they actually change their rates to reflect market conditions, so we’ll see the more nimble ones cutting rates next week.
“For some it might take a little bit longer, but the trend is clearly only going one way at the moment.”
David Hollingworth, of L&C Mortgages, said he expected the first moves from big lenders within days.
He added: “This is just a pronounced improvement in a very short time. [Swap rates] have come down so substantially that that is bound to see some movement in mortgage rates.
“Because the market has remained so competitive, we’ve had lenders tweaking wherever they can, although those tweaks have become really quite small in recent weeks, this is going to open up a new range of possibilities for lenders.
“We have seen five-year rates dipping back below 4pc and I see the potential for more lenders to enter that space.”
It came as Halifax said house prices fell by 0.5pc in March, reducing the average value of a home by just over £1,500. Prices remain 2.8pc higher than a year ago.
Amanda Bryden, of Halifax, attributed the drop to a lull in activity after a rush to complete purchases in January to beat the March stamp duty deadline.
