Santander cuts its mortgage rates: Lender now offers three best buy deals for home movers

Santander has become the latest lender to cut interest rates on its mortgages.

As of today, the bank has reduced interest rates by 0.05 to 0.56 percentage points on a number of deals aimed at home buyers, refinancers and landlords.

It follows significant rate cuts from both Halifax and Nationwide earlier this month.

> How to remortgage your home: a guide to finding the best deal

Best rate: Starting today, Santander has reduced rates on a number of deals by 0.05 to 0.56 percentage points

Santander’s rate changes include three new best bargains for homebuyers who choose to lock in for five years. They all come with an arrangement cost of £999.

The cheapest five-year solution, available to people buying with at least a 40 percent deposit (60 percent loan-to-value), has fallen from 4.95 percent to 4.64 percent.

> Check how much you would pay with our best mortgage interest calculator

According to Moneyfacts data, the average five-year mortgage rate is currently 5.9 percent.

Someone buying a house with a £200,000 mortgage on Santander’s cheapest deal can expect to pay £1,128 per month, compared to the market average of £1,276 per month. That’s a saving of £148 per month, or £1,176 per year.

Those purchasing with at least a 25 percent deposit (75 percent loan-to-value) can now secure a market-leading rate of 4.74 percent with Santander, up from 5 percent previously.

Those who buy with a 10 percent down payment can do so at a rate of 5.15 percent. Again, this is better than any other lender at the time of writing.

Those who prefer to buy with a two-year term and a 10 per cent deposit can now also secure a market-leading rate of 5.7 per cent with Santander.

Those with larger deposits can also do well. Santander charges 5.14 percent for its two-year fixed rate, aimed at those who buy with a 40 percent deposit. This is only marginally improved by TSB, which charges 5.09 percent.

Those with a 25 percent down payment can secure a rate of 5.24 percent. Again, this is only improved by TSB charging 5.14 percent.

Santander also reduced rates for people who refinance.

Of particular importance are the remortgage agreements with a two-year fixed interest rate. Many borrowers are hedging their bets against a drop in interest rates over the next few years, meaning two-year fixed rates have grown in popularity lately.

While none are market leaders, Santander’s two-year fix for companies with at least 40 percent equity (60 percent loan-to-value) has fallen from 5.64 percent to 5.33 percent.

Currently, TSB, Barclays, Nationwide and Leeds Building Society all offer marginally lower rates.

However, with the average two-year fixed rate being 6.34 percent, Santander’s deals are highly competitive, according to Moneyfacts.

Chris Sykes, mortgage adviser at Private Finance, says Santander along with other lenders are likely to try to meet lending targets before the end of the year

Chris Sykes, mortgage adviser at broker Private Finance, believes the recent wave of rate cuts by mortgage lenders could be a sign that banks are looking to meet their annual lending targets before the end of the year.

He says: ‘These cuts are significant. Santander has certainly taken its foot off the accelerator for a while now and there have been many more competitive offerings elsewhere.

“But now it has put its foot firmly back on the ground with today’s announcement. It is now market leading for several situations I have seen.

‘Maybe this will be a last attempt to gain market share in 2023. While we often see lenders being more competitive during the first half of the year and becoming less competitive in the last three months as a result of meeting targets, it appears that somewhat the opposite is happening this year with many lenders meeting set targets not. 2023.’

Because approximately 1.6 million people will have to take out a new mortgage next year, Sykes advises them to plan ahead.

It is possible to lock in a mortgage offer six months before it takes effect and borrowers can always switch to a cheaper deal at a later date.

“I would advise anyone who is coming to the end of their mortgage product within six months to look at it now,” says Sykes.

“You can always change it closer to the time if rates improve before completion.”

‘There are obviously considerations to take into account, but I have saved hundreds of thousands of customers recently by reviewing rates.’