- Withdrawn deals include Santander’s market-leading five-year fix of 3.68%
Santander has temporarily withdrawn some of its mortgage deals, in a sign that home loan prices may start to rise again.
From 10pm tonight, the bank says it will withdraw eight fixed rate agreements, including its market-leading five-year rate of 3.68 percent.
It says it will relaunch these deals from next Tuesday. However, a mortgage expert suspects that the restart will be accompanied by higher rates.
Nicholas Mendes, mortgage technical manager at broker John Charcol, said: ‘I suspect this ‘temporary withdrawal’ means the lender will pause, review and relaunch at a higher rate.”
> What next with the mortgage interest rate in 2024
Smokescreen? Santander says it is temporarily withdrawing some flat rates at 10pm tonight and will relaunch next Tuesday. But one mortgage expert suspects this will happen at higher rates
If correct, it means that Santander’s five-year interest rate fix of 3.68 percent will cease to exist from tonight.
This was available to movers and first-time buyers with a minimum 40 percent deposit.
This leaves Barclays as the lowest five-year fixed deal on the market at 3.71 percent.
In addition to the temporary withdrawal of its market-leading deal. Santander is also withdrawing its five-year fix of 3.92 per cent for those who buy with a 25 per cent deposit.
Those who buy with a 15 percent down payment also lose access to the five-year fix of 4.15 percent.
> Best mortgage interest rate for starters
Why is Santander temporarily withdrawing deals?
Mortgage lenders price their fixed mortgage rates based on the Sonia swap rate, financing targets, borrower demand and general economic sentiment.
Sonia swaps are the easiest way to interpret where fixed rates are headed.
Simply put, Sonia swap rates essentially show what lenders think the future holds in terms of interest rates.
When sonia swaps rise enough, it often results in a rise in the fixed mortgage rate, and vice versa when it falls.
In recent weeks, Sonia swaps have risen again. As of October 9, two-year swaps were 4.05 percent and five-year swaps were 3.79 percent.
That is an increase compared to September 20, when the two-year swaps were 3.82 percent and the five-year swaps were 3.52 percent.
Expert: Nicholas Mendes, mortgage technical manager at estate agent John Charcol, suspects this ‘temporary withdrawal’ means Santander will relaunch at a higher rate
Mendes thinks a major factor behind Santander’s product withdrawals may have to do with profit margins and pricing.
“Lenders set mortgage rates based on market factors such as swap rates, which affect the financing costs for fixed-rate mortgages, and competitor offerings,” Mendes said.
‘Normally, lenders determine the mortgage interest rate fourteen days in advance. If market conditions change during that period – for example if swap rates rise – a previously profitable product may no longer make financial sense.
‘In such cases, the lender may withdraw the product to avoid offering a mortgage that could lead to financial losses.
‘Having reassessed the market, they will likely reprice the product when it comes back to market, often with higher interest rates or changed terms to restore profitability.
However, Mendes also says that Santander’s decision could be due to its service level and high demand from borrowers.
“If a mortgage product is too competitive in the market, meaning the lender’s offer is more attractive than others, this can lead to an increase in applications,” Mendes said.
‘While the high demand appears positive, it may put pressure on the lender’s ability to process applications efficiently.
‘To maintain good levels of service and ensure applications are processed in a timely manner, the lender may need to temporarily withdraw the product to keep the workload under control.
“Once they catch up, they may be able to reintroduce the product, possibly at the same rate or on modified terms.”
> The best buy-to-let mortgages for landlords