Santander and Barclays latest major mortgage lenders to cut rates as more fixed deals approach 4%
Santander and Barclays are the latest lenders to cut mortgage rates following similar moves from Halifax, Nationwide and The Mortgage Lender.
On Tuesday, January 24, Santander’s prices fell by up to 0.2% across its entire product line.
Offers for new customers fell 0.12% on fixed rates and 0.15% on certain follow-on products.
Price war? More mortgage lenders are canceling fixed rate deals despite impending base rate hike
Trackers follow the Bank of England base rate, plus or minus a certain percentage. Currently, the base rate is 3.5%, but many expect it to rise to 4% when the Monetary Policy Committee meets next month.
The increase would mean higher mortgage costs for those with a follow-up product, although on average they are cheaper than current fixed rates in the market.
Similarly, Barclays has reduced tariffs on part of its product range. It now has a five-year fixed rate agreement for borrowers with a 25% deposit at 4.41%, a reduction of 0.27%.
On a £200,000 25-year mortgage, the rate cut would save customers £31 a month or £372 a year.
The lender is also offering a two-year trailing agreement for those with a 25% deposit for 3.86%, up from 3.99%. It also offers exclusive rates for its Premier banking customers.
Mortgage rates rose rapidly at the end of last year, thanks to uncertain economic conditions in the UK and the fallout from September’s disastrous mini-budget, but are now slowly falling.
According to MoneyFacts, interest on the average five-year fixed mortgage has fallen well below 6% to 5.27% as more lenders cut rates. The average two-year fixed rate is now 5.5%.
But the best deals available right now are heading towards 4%, with rates as low as 4.18% over a five-year term for those with larger deposits.
>> Will we see mortgage rates drop below 4% this year?
Over a 10-year term, the lowest rate available is currently 4.04% with Halifax – although, as with most of the cheapest deals, it comes with a hefty fee of £1,048.
David Hollingworth of mortgage broker L&C said: “The pace of change in mortgage rates has accelerated, but unlike last year we are now seeing rates come down as the price war escalates.”
“More stable and cheaper financing terms allow lenders to improve rates and reverse some of the huge increases that followed the mini-budget.
“Competition between lenders is likely to be fierce because they want to lend and will therefore have to offer attractive products. I expect fixed rate cuts to continue despite the possibility of another base rate hike next week.
For homebuyers, Santander is now offering a 25% down payment, a five-year fixed rate at 4.58% with no fees. On a £200,000 25-year mortgage, the monthly cost would be £1,121; £288 per year cheaper than the old rate for the same offer at 4.69%.
The bank has also introduced a new 40% deposit, a three-year fixed rate at 4.77% with a fee of £999.
>> Will we see mortgage rates drop below 4% this year?
Ups and downs: Mortgage rates have been steadily rising since the Bank of England started raising the base rate. They then increased after the mini budget, but are now slowly decreasing
On its transfer rate products, for existing customers who need to remortgage on a new deal, Santander has reduced all fixed rates for those with deposits of 15% or more from 0.05% to 0.12%. It also reduced all two-year follow-ups by 0.2%.
Lewis Shaw, owner of broker Riverside Mortgages, said: “As expected, the price war that started with the Halifax and Nationwide rate cuts has started to work through other mortgage lenders, all competing for good quality borrowers.”
Accord Mortgages also made price reductions on LTVs with select 25% deposit rates down to 0.2% and around 5% deposit rates down 0.57%. The new range will be available from January 25.
Shaw added: “This is great news for aspiring buyers who just months ago felt like the prospect of buying their first property had been taken away from them.” This is the news we all need after months of misfortune and sadness.
What to do if you need a mortgage
Borrowers who need to find a mortgage because their current fixed rate contract is coming to an end or because they have agreed to buy a home should explore their options as soon as possible.
This is Money’s best mortgage rate calculator, powered by L&C, that can show you deals that match your mortgage and property value.
What if I need to remortgage?
Borrowers should compare rates and speak to a mortgage broker and be prepared to act to get a rate.
Anyone with a fixed-rate deal ending in the next six to nine months should consider how much it would cost them to remortgage now — and consider entering into a new deal.
Most mortgage transactions allow fees to be added to the loan and they are then only charged at the time of subscription. By doing so, borrowers can secure a rate without paying costly arrangement fees.
What if I buy a house?
Those who have agreed to buy a home should also aim to get quotes as soon as possible, so they know exactly what their monthly payments will be.
Homebuyers should be wary of overstretching and prepare for the possibility of home prices falling from their current high levels, due to higher mortgage rates limiting people’s ability to borrow.
How to Compare Mortgage Costs
The best way to compare mortgage costs and find the right deal for you is to talk to a good broker.
You can use our best mortgage rate calculator to view offers that match your home’s value, mortgage size, term, and fixed rate needs.
Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage, compare rates and then speak to a broker as soon as possible, so they can help you find the loan mortgage that’s right for you.
> Check out the best fixed rate mortgages you could apply for