A major high street bank has blown the fixed rate mortgage price war wide open by cutting rates to below 4 per cent.
From Thursday, Santander is launching 3.99 per cent rates for both its lowest two-year and five-year fixed products.
It’s the first time since November the lowest residential fixed mortgage rates have dipped below 4 per cent.
To be eligible for Santander’s lowest rates, home buyers will need at least a 40 per cent deposit while homeowners will need 40 per cent equity within their home.
Both deals will be available to home buyers and people remortgaging but come with a chunky £1,999 fee attached.
On a £200,000 mortgage being repaid over 25 years a 3.99 per cent rate will cost someone £1,054 a month.
> Use our True Cost Mortgage Calculator to compare rates AND fees
Gamechanger: Santander is cutting rates by up to 0.4 percentage points across all fixed its deals
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, said: ‘It is great to have sub-4 per cent fixed rates available again because they really are the new benchmark for cheap mortgages.
‘There is clearly a need for more competitively priced rates with so many first-time buyers keen to get on the property ladder this year and a reported 1.8 million homeowners needing to remortgage.
‘If Santander can launch 3.99 per cent fixes then other lenders can do it too, so this is hopefully the start of the much anticipated price war.
‘It seems like the recent base rate cut has helped to nudge rates down which is good news for borrowers.’
Last week, the Bank of England cut interest rates from 4.75 per cent to 4.5 per cent and mortgage rates have been cut by many major lenders as a result.
Chris Sykes, technical director at mortgage broker Private Finance says while it’s great news, he doesn’t expect to see too many more deals go below 4 per cent given current interest rate projections.
‘This is fantastic news for borrowers,’ said Sykes, ‘but we don’t expect to see lots of products at sub 4 per cent as the margin on this is paper thin.
‘We’ve seen lenders offering these almost loss leading products in the past for the press that comes with it and with many lenders reporting ambitious targets for this year it could be that this is a push by Santander to get some early market share.’
