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Residential Market

Mortgage rates continue to plunge below 5% as Barclays cut five-year fixed deal

The move follows a flurry of rate cuts, offering hope to first-time buyers
David Hannah, Group Chairman of Cornerstone Tax, discusses the need for further interest rate cuts in a bid to further stimulate the housing market

Friday will see Barclays join Nationwide, Natwest and Virgin Money as the next major mortgage lender to cut fixed rate deals for home buyers. As competition among bankers intensifies, Barclays will offer a five-year fix for purchasers that will charge 4.39% interest. This move is the latest in a series of dramatic mortgage rate slashes that began in early November with Nationwide’s introduction of a two-year fixed-rate mortgage priced below 5% to market for the first time since June. Following the Bank of England’s decision to hold interest rates at 5.25% on November 2nd, mortgage lenders from across the country have been making further cuts as the likelihood of rate hikes continues to dissipate. David Hannah, Group Chairman of Cornerstone Tax, the UK’s leading property tax advisory, argues that the BoE should consider further cuts to interest rates in a bid to further stimulate the UK’s housing market.

Whilst Friday’s announcement from Barclays should offer hope to first time buyers, the current rates being offered follow a series of 14 consecutive interest rate hikes beginning in December 2021. Following a period of sustained low interest rates throughout the 2010s and a brief interval where interest rates near-zero in the first two years of the 2020s – the average price of a five-year fixed rate mortgage in July 2020 was approximately 2.25%. With rates remaining almost double what they were three years ago, many prospective first-time buyers still feel discouraged from taking their first steps on the housing ladder. This is despite UK house prices reporting their fastest year-on-year fall in fourteen years last month. 


In the wake of the OBR’s announcement that the rate of inflation had fallen from 6.7% to a two-year low of 4.6% - David Hannah has urged the Monetary Policy Committee to consider further cuts to the interest rate in their next meeting on the 14th of December. Asserting that a future base rate of 3-3.5% would give mortgage lenders the confidence to pursue further cuts to their repayment rates and provide first-time buyers with the support that they need to escape an increasingly overheated rental sector. 

David Hannah, Group Chairman of Cornerstone Tax, comments: 
“In the next few months, we should hope to see a flurry of activity within the housing market, as mortgage lenders continue to slash their rates and house prices continue to fall across the country. First-time buyers should be especially emboldened to look towards taking their first step on the housing ladder as opportunities continue to crop up.

“I hope that we will see the BoE cut interest rates by at least half a basis point at their next meeting – this would catalyse activity in the housing market and allow for somewhat of a soft landing rather than a potential crash. Additionally, easing the interest rates might bolster consumer confidence, encouraging investment and spending in various other sectors, stimulating economic activity at a time when the UK most needs it.”

David Hannah, Group Chairman
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