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Trump launches plan to target countries with new tariffs
Seven major mortgage lenders cut rates
Last week, seven major UK mortgage lenders announced reductions in their interest rates.
These lenders include Barclays, Nationwide Building Society, Yorkshire Building Society, TSB, BM Solutions, Coventry Building Society, and Leeds Building Society.
Among them, Barclays lowered the mortgage deal costs for its fixed-rate products aimed at home movers and first-time buyers, with rates as low as 3.99%, matching the rate cut previously announced by Santander.
However, similar to Santander, this rate applies only to buyers with the highest deposit—40% of the property price. Additionally, to qualify for Barclays’ rate discount, buyers must either be Premier Banking customers or be purchasing an energy-efficient home—one with an Energy Performance Certificate (EPC) rating of A or B.
Meanwhile, Yorkshire Building Society cut rates for the second time in a week, now offering some of the best deals in the market. Its lowest five-year fixed rate is 4.1% with a £995 fee, while the lowest two-year fixed rate is 4.23%. Both rates apply to homeowners with at least 40% home equity.
Will Mortgage Rates Continue to Decline?
For households approaching remortgaging and prospective homebuyers, interest rate changes are crucial. With many major lenders lowering mortgage rates, there is growing speculation that the Bank of England will continue to cut interest rates.
As of February 11, the five-year swap rate stood at 3.86%, while the two-year swap rate was 3.97%. Chris Sykes, Technical Director at mortgage brokerage Private Finance, noted:
“For the first time since November 2024, the five-year fixed mortgage rate has dropped below 4%. This is good news for eligible borrowers. However, since lenders’ profit margins on funding costs remain very tight, we do not expect all lenders to follow suit.”
Will Swap Rates Decline Further?
According to Chris Sykes, the answer is: “It’s possible.” The Sonia swap rate—which influences the pricing of fixed-rate mortgages—has been declining after rising earlier this year due to an increase in UK government bond yields. Comparing today’s two-year and five-year swap rates with the same period last month, they have fallen by approximately 0.35 percentage points.
However, since lower swap rates reduce lender profit margins, this downward trend is likely to make lenders more cautious in their pricing strategies.
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Trump launches plan to target countries with new tariffs
On February 13, Trump signed a memorandum directing officials to present a “reciprocal trade and tariff” plan within 180 days. The plan will take into account existing tariffs, exchange rates, trade balances, and other regulations. The White House emphasized that tariffs imposed by other countries are not the only concern, specifically criticizing the European Union’s policies, which allegedly disadvantage U.S. exporters.
Although many key details remain unresolved, this announcement is likely to trigger global trade negotiations.
Which Countries Might Be Affected?
Howard Lutnick, Trump’s nominee for Commerce Secretary, has stated that his team will submit a proposal to the President by April 1.
According to sources, in addition to the EU, the tariff plan is expected to impact trade relations with countries like India, Vietnam, and Thailand—all of which have relatively high tariffs and rely on the U.S. as a major export market.
India has already reduced tariffs on some key goods, such as motorcycles. Meanwhile, Thailand and Vietnam have announced that they are reviewing their trade relationships with the U.S. The EU, on the other hand, has reaffirmed its commitment to close cooperation with the U.S. while also promising to protect the interests of its member states.
What Are Reciprocal Tariffs?
Tariffs are taxes imposed by governments on imported goods, usually paid by the importing company. Countries often use tariffs to protect domestic industries from foreign competition. Historically, the U.S. has promoted free trade, maintaining low tariff rates on most products, except for specific goods like footwear, steel, and aluminum.
According to World Trade Organization (WTO) data, the average U.S. tariff rate is 3.4%, while Europe’s average tariff rate is 5%. The White House has highlighted specific grievances, such as:
- S.-made cars facing a 10% tariff in Europe, while the U.S. only imposes a 2.5% tariff on European cars.
- Tariffs being used to challenge broader policies, including:Digital services taxes on U.S. tech giants in Canada, the UK, and the EU.
- European VAT (Value Added Tax) rules, which the U.S. argues put American businesses at a disadvantage.
Potential Economic Impact of Tariffs
Earlier, Trump ordered a 25% tariff on all imported steel and aluminum, revoking exemptions for the EU, UK, and Brazil. This measure is expected to take effect next month. Additionally, he raised tariffs on all Chinese goods to 10% and threatened a 25% tariff on imports from Canada and Mexico, though this has been delayed until March.
John Cassidy, CEO of Red Cedar Investment Management, warned that Trump’s rapid tariff decisions could create uncertainty for Wall Street, stating:“Markets dislike uncertainty, and Trump’s fast-moving tariff strategy is making investors nervous.” However, he also urged against overreaction, noting that the tariffs imposed during Trump’s first term had only a moderate impact on the U.S. economy.
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Surprise growth in UK economy at end of 2024
Official data shows that the UK economy grew by 0.1% in the final quarter of 2024, defying economists’ expectations of a 0.1% contraction. The stronger-than-expected 0.4% growth in December provided a boost to the quarter’s overall performance.
Although this growth offers some relief to Chancellor Rachel Reeves amid concerns over the UK’s economic outlook, long-term challenges remain.
The 0.1% GDP growth between October and December 2024 was driven by multiple sectors, with pubs, restaurants, and machinery manufacturers showing strong performance in December.
However, despite this slight expansion, official data indicates that the average standard of living in 2024 remained slightly lower than in 2023.
From April, higher taxes are set to take effect, raising concerns over prolonged economic stagnation. Employers’ National Insurance contributions will increase, the minimum wage will rise, and business tax relief will be reduced. Business owners are expected to cut back on wage increases and slow job creation.
The Bank of England has halved its economic growth forecast for 2025, warning that higher costs for employers could impact hiring, profits, and investment, potentially driving up prices. Paul Dales, Chief UK Economist at Capital Economics, predicts that the UK economy is likely to stagnate over the next six months. The autumn budget’s tax hikes will weigh on economic activity. Additional pressure could come from U.S. trade tariffs and domestic businesses adjusting to higher costs. As a result, the first two quarters of 2025 are expected to see weak business sentiment, declining investment, and lower consumer spending.
