As Trump’s renewed trade war causes volatility in global financial markets, it’s increasingly likely that these disruptions will spill over into both international and UK economic conditions, potentially influencing the mortgage landscape as well.
We’ve seen similar market reactions before. When Liz Truss became Prime Minister and introduced a controversial budget, it eroded confidence in the UK government’s fiscal policy. The result? Inflation surged, the Bank of England increased base rates sharply, and mortgage rates jumped, from around 4% to 5-6% or even higher in just a few months.
What the Past Teaches Us: Why Higher Mortgage Rates Didn’t Derail the UK Housing Market
That episode reminds us that rising mortgage rates don’t always spell disaster for the property market. Historically, such spikes might have caused a crash, just like in 2008 when lending nearly ground to a halt. However, during the recent increase, property prices only declined by about 5% on average (excluding the Prime property segment), far from a market collapse.
Why was the impact muted?
More outright homeowners: Since the 2008 crash, more people now own their homes without a mortgage, reducing exposure to rate changes.
Higher equity levels: Many first-time buyers since 2014 have chosen repayment over interest-only loans, increasing their equity.
Stricter lending rules: Mortgage stress tests at 6-7% have made borrowers more resilient to interest hikes.
Cash buyers still active: Data from Zoopla shows that nearly 50% of buyers use cash or have very low loan-to-value (LTV) mortgages.
Policy safety nets: Government interventions during past crises, including 2008, COVID-19, and the cost-of-living crunch, have kept repossession rates down and helped stabilise prices.
Now, as a new economic ripple effect unfolds, the key question is: What’s next for UK mortgages?
What Do Trump’s Tariffs Mean for 2025 Mortgage Rates?
Surprisingly, Trump’s tariff announcements have so far pushed UK mortgage rates downward. According to the BBC, “A growing number of UK lenders are cutting mortgage rates as the fallout from US tariffs continues to fuel forecasts of deeper than expected interest rate cuts.”
Data from Moneyfacts and the BBC shows that average two- and five-year fixed-rate deals have now fallen to their lowest levels since July 2023. Though they might still seem high by post-2008 standards, it’s worth noting that average rates hovered between 5% and 7% before the credit crunch—meaning we’re simply returning to historical norms.
Even better news: borrowers with strong deposits are seeing rates dip below 4%, levels not seen since 2022.
Capital Economics, known for its reliable base rate forecasts, predicts that “UK inflation and interest rates [are likely to] fall quicker than we previously anticipated.”
The driving factor? Market sentiment now expects the Bank of England base rate to fall from its current 4.5% to 3.75%, thanks in part to Trump’s aggressive tariff strategy—especially against Chinese imports. That’s four expected rate cuts, up from three prior to the tariff news.
Projections from Capital Economics, as cited in the Daily Mail, even suggest rates could drop further to 3.5% by 2026.
And What About Buy-to-Let Mortgages in 2025?
The impact isn’t limited to residential buyers. The National Landlord Investment Show turned to Gavin Richardson, Managing Director at MFB Mortgage Finance Brokers, for expert commentary on how Trump’s trade moves could influence buy-to-let borrowing—and whether investors should lock in rates now or wait.
Source: Kate Faulkner OBE, Founder of PropertyChecklists.co.uk, on National Landlord Investment Show
