Barclays cuts key fixed rates below 4% following US tariff shock, sparking talk of a lender price war.

Barclays has become the first of the UK’s “big six” banks to cut mortgage rates below 4% in what brokers are calling a potential turning point for the housing market, as financial markets react to US tariff upheaval.

The bank’s move marks the clearest signal yet that turbulence sparked by President Trump’s surprise tariff freeze could be triggering a wider shake-up in the lending landscape. Barclays announced on Thursday that it would cut rates on a number of fixed mortgage deals by up to 0.38 percentage points from Friday, with some rates now dipping under the 4% threshold.

Among the headline changes, two- and five-year fixed-rate mortgages for buyers with substantial deposits will fall from 4.11% and 4.12% respectively to 3.99%.

While sub-4% deals have sporadically returned to the market in recent months, few two-year products have breached that barrier until now. Just one day earlier, Coventry Building Society made headlines by launching a 3.94% two-year fix—seen as a bold move by a smaller lender.

Barclays’ decision, however, marks a significant shift in the market narrative. As the UK’s largest lender to take the plunge, it raises the likelihood that other high-street banks could follow suit and trigger a fresh mortgage price war.

“The big question, of course, is whether that pricing decision was instigated prior to the Trump tariff reversal or with full knowledge of it,” said Stephen Perkins, managing director at Yellow Brick Mortgages. He was referring to President Trump’s unexpected announcement on Wednesday to pause his controversial “liberation day” tariffs for 90 days, with the exception of those targeting China.

David Stirling, director at Mint Mortgages & Protection, believes the move may be strategic rather than speculative. “It remains to be seen whether Barclays is simply dipping their toes in,” he said. “But the general feeling is that other major lenders will follow suit this week.”

Others were more cautious. Pete Mugleston, managing director of Online Mortgage Advisor, warned that while Barclays’ cuts may pressure rivals, “given the unpredictability in the markets, it wouldn’t be a shock if other lenders held back until some semblance of stability returns in the next week or two.”

For homeowners and prospective buyers, the news offers a glimmer of relief after months of rate volatility. Mortgage rates surged across 2023 and early 2024 as the Bank of England fought stubborn inflation, pushing the base rate to 4.5%. With inflation now easing and economic uncertainty back on the agenda, hopes of interest rate cuts have re-emerged.

Just earlier this week, City traders viewed a rate cut in May as a near-certainty. Now, amid the latest US developments, the odds of such a move have slipped slightly. On Thursday morning, markets priced in a 78% chance of a cut from 4.5% to 4.25% at the Bank’s 8 May meeting, with a 22% likelihood that policymakers may opt to keep rates unchanged.

Some had even speculated that the Bank of England might go further and slash rates by half a percentage point to 4%. But the latest twist in US trade policy appears to have cooled that momentum, at least temporarily.

Whether Barclays’ move marks the start of a broader shift or remains a short-lived strategy is now the central question facing borrowers and brokers alike. If other high-street giants respond in kind, Britain’s mortgage market could be headed for a fresh bout of competition—offering potential savings for thousands of homeowners as the summer buying season nears.