Trump’s Tariff and it’s implications for the UK mortgage market

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By Prospect Mortgage Services
09/04/2025

In light of President Donald Trump’s recent announcement of new tariffs, we explore the possible impact on the UK economy and specifically what impact tariffs may have on the UK mortgage market. This is a rapidly developing situation, and comments are based on information available as of 8 April 2025.

What is a tariff?

A tariff is a tax imposed on imported goods to make foreign products more expensive, encouraging consumers and businesses to buy domestic alternatives. For instance, a 54% tariff on Chinese electronics will increase their prices, potentially making American-made electronics more competitive.

However, tariffs can also raise costs for domestic consumers and businesses relying on global supply chains, leading to:

  • Higher prices (inflation)
  • Reduced competitiveness
  • Slower economic growth

This is why markets and economists are concerned.

What about the UK?

Although the UK is not directly targeted, it will still feel the impact:

  • A U.S. tariff regime could cause UK exports to drop by £22 billion.
  • A 0.8% reduction in UK economic output is possible as global demand slows.

Why does all of this matter for the UK mortgage market?

With global supply chains disrupted and trade costs rising, imported goods become more expensive, pushing up inflation. In the UK, where inflation has already been a concern, this adds further pressure.

The Bank of England (BoE) faces a difficult decision. While inflationary forces could push it to raise interest rates, markets are increasingly pricing in rate cuts, believing that the global economic shock from Trump’s tariffs could weaken demand and slow growth. Swap rates, which influence fixed-rate mortgages, fell after the tariff announcement — prompting speculation that borrowing costs could fall. Some mortgage brokers even voiced optimism that this could be a boom for the housing market, giving buyers and remortgagers a window to access cheaper loans.

However, caution is advised, and betting on rate cuts may be risky.  The wider effects of unemployment, price inflation and general economic conditions are the real unknowns.

So, while swap markets suggest the potential for falling mortgage rates, the reality remains uncertain. Borrowers will need to balance optimism with a dose of realism, given how unpredictable the global picture remains.