A major high street bank has intensified the mortgage price war by slashing fixed rates below 4% for the first time since November.
Starting Thursday, Santander will introduce 3.99% rates on its lowest two-year and five-year fixed mortgage products. This marks a significant shift in the market, offering borrowers a more affordable option amid ongoing interest rate fluctuations.
To qualify for these competitive rates, home buyers must provide at least a 40% deposit, while existing homeowners will need a minimum of 40% equity in their property.
Both deals are open to home buyers and those looking to remortgage; however, they come with a £1,999 fee. For a £200,000 mortgage repaid over 25 years, a 3.99% rate would result in monthly payments of approximately £1,054.
Santander says the majority of new fixed rates – both aimed at households and buy-to-let landlords – will be reducing by up to 0.4 percentage points.
It follows shortly after NatWest announced it would be lowering mortgage rates by as much as 0.36 percentage points.
Mortgage brokers welcomed the announcement as good news for borrowers and the housing market as a whole.
Aaron Strutt, of mortgage broker Trinity Financial, welcomed the return of sub-4% fixed mortgage rates, calling them the new benchmark for affordable home loans.
He highlighted the strong demand for lower rates, with many first-time buyers eager to step onto the property ladder and an estimated 1.8 million homeowners needing to remortgage this year.
Strutt also suggested that Santander’s move could encourage other lenders to follow suit, potentially triggering the long-anticipated mortgage price war.
He added that the recent base rate cut appears to have played a role in bringing mortgage rates down—welcome news for borrowers looking for better deals.
Last week, the Bank of England reduced interest rates from 4.75% to 4.5%, prompting many major lenders to lower their mortgage rates in response.
Chris Sykes, technical director at mortgage broker Private Finance, acknowledged that while this is positive news for borrowers, he doesn’t anticipate a significant number of deals falling below 4% due to current interest rate projections.
“This is fantastic news for borrowers,” Sykes said. “However, we don’t expect to see many sub-4% products, as the profit margins on these deals are extremely slim.”
He explained that some lenders have previously offered such low rates as a strategic move to attract attention, even if they are not highly profitable. With many lenders setting ambitious targets for the year, Santander’s latest rate cut could be an effort to secure early market share.
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