Mortgage rates falling: Santander and Barclays latest lenders to reduce prices

Santander and Barclays are the latest lenders to cut their mortgage rates following similar moves from Halifax, Nationwide and The Mortgage Lender.

On Tuesday, January 24, Santander’s rates fell by up to 0.2 percent across the entire product range.

New customer deals fell 0.12 percent on fixed rates and 0.15 percent on select tracker products.

Trackers track the Bank of England base rate, plus or minus a certain percentage. Currently, the base rate is 3.5 percent, but many expect it to rise to 4 percent when the Monetary Policy Committee meets next month.

The increase would mean an increase in mortgage costs for those with a tracker product, despite these being cheaper on average than current fixed market rates.

Similarly, Barclays has reduced rates on some of its product range. It now has a five-year fixed-rate deal for borrowers with a 25 percent down payment at 4.41 percent — a discount of 0.27 percent.

On a £200,000 mortgage over 25 years, the rate cut would save customers £31 a month or £372 a year.

The lender is also offering a two-year tracker deal for those with a 25 percent down payment for 3.86 percent, down from 3.99 percent. It also offers exclusive rates for its Premier banking customers.

Mortgage rates rose rapidly at the end of last year, thanks to the uncertain economic conditions in the UK and the consequences of the disastrous mini-budget in September, but are now falling slowly.

Rates on the average five-year fixed mortgage have fallen well below 6 percent to 5.27 percent, according to MoneyFacts, as more lenders lower their rates. The average two-year fixed interest rate is now 5.5 percent.

But the best deals available right now are moving towards 4 percent, with rates as low as 4.18 percent on a five-year fix for those with larger deposits.

>> Will we see mortgage rates below 4% again this year?

On a 10-year fix, the lowest rate available is currently 4.04 per cent at Halifax – although as with many 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 increased, but unlike last year, we are now seeing rates fall as the price war heats up.

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 borrow and therefore have to offer attractive products. I expect that we will continue to see fixed rate cuts continue, despite the potential for another rate hike next week.”

For homebuyers, Santander now offers a 25 percent down payment, five-year flat rate of 4.58 percent with no fees. On a £200,000 mortgage over 25 years, the monthly cost would be £1,121; £288 a year cheaper than the old rate for the same deal at 4.69 per cent.

The bank has also introduced a new 40 per cent deposit, a three-year fixed rate of 4.77 per cent with a fee of £999.

On its transfer rate products, Santander has reduced all fixed rates for customers with a deposit of 15 percent or more for existing customers who need to take out a new mortgage by 0.05 percent to 0.12 percent. It also cut all two-year trackers by 0.2 percent.

Lewis Shaw, owner at broker Riverside Mortgages said: ‘As predicted, the price war that began with Halifax and Nationwide lowering rates is beginning to work through other mortgage lenders, all competing for quality borrowers.’

Accord Mortgages also implemented price reductions for all LTVs with select deposit rates of 25 percent reduced by up to 0.2 percent and approximately 5 percent deposit rates reduced by 0.57 percent. The new range will be available from 25 January.

Shaw added: ‘This is great news for would-be homebuyers who, just a few months ago, felt like they’d had the prospect of buying their first property. This is the news we all need after months of doom and gloom.”