Mortgage Rates Cut as Market Awaits Budget and Possible Property Tax Changes

Lenders have made notable reductions to mortgage rates as the property market prepares for potential tax reforms in the forthcoming Budget. Barclays has decreased its five year fixed mortgage rate by 0.3 percentage points to 4.35 percent. Halifax and Skipton Building Society have followed suit by lowering rates on several of their own mortgage products. These cuts come after similar moves by lenders such as HSBC, Santander, TSB and NatWest last week.

Industry analysts attribute the flurry of rate cuts to heightened competition among banks, set against the backdrop of a property market experiencing a slowdown. According to Rightmove, the average asking price for homes has dropped by 6,589 pounds or 1.8 percent so far in November, the largest decline for this month since 2012. Prospective buyers are increasingly holding off, awaiting the outcome of next week’s Budget amid speculation that Chancellor Rachel Reeves may target property taxes.

The downward trend in mortgage prices is influenced by a sustained fall in interest rates and a consistent decrease in interest rate swaps. These swaps are a key tool in pricing fixed rate mortgages. Two year swaps have fallen to 3.57 percent, compared to 3.83 percent in May. Analysts remain cautiously optimistic that a further interest rate cut may come in December, with gradual reductions possible next year if inflation remains contained.

Upcoming Budget announcements are likely to affect mortgage rates further. Policy changes viewed unfavourably by financial markets could lead to a rise in rates and lender costs. Last week the Chancellor abandoned proposed increases to income tax, intensifying speculation about property tax rises instead. Economic experts have raised concerns that broad tax increases could hinder economic growth.

Many in the market are now watching closely for government moves that could shape the UK housing and mortgage landscape for months to come. With both average property prices and mortgage rates falling, and with uncertainty around fiscal policy, buyers and lenders alike are exercising caution.