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"Mortgage market melee has formally started" as Santander launches sub-5% fixed rate

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ended 25. September 2023

Santander today announced wide-ranging cuts to its fixed rate deals for both new and existing borrowers (see screengrab below). With a 5-year fixed rate for purchase clients of 4.95% at 60% loan-to-value, and a sub-5.5% 2-year fixed rate, brokers said more cuts are likely as the competition heats up.

Simon Bridgland, director of Canterbury-based broker, Release Freedom, said: “This week's mortgage market melee has formally started. I expect things to end up looking rather attractive by the time the week is out.”

His views were shared by Michelle Lawson, director at Fareham-based broker, Lawson Financial: “This is great news for the industry and other lenders will have to follow. Hopefully we will start to see some confidence and stability return to the mortgage and property markets.”

Richard Campo, founder of London-based Rose Capital Partners, also welcomed the announcement: “Santander are the latest to enter the hallowed ground of lenders who offer a mortgage that starts with a 4 and I feel they are far from being last. As money markets continue to fall, and lender competition hots up, I expect all major lenders to follow suit."

David Walsh, director at London-based broker, Kite Mortgages, also said falling money market costs and rising competition are driving the rate changes: “With swap rates coming down, this is clearly now being passed onto end borrowers, which is great news. There is always competition between lenders who all have targets to meet, so they will want to be as competitive on price as they can be, whilst maintaining their margins.”

Meanwhile, Justin Moy, founder at Chelmsford-based mortgage broker, EHF Mortgages, said last week's inflation data and Bank of England interest rate decision also played a role: "This is a positive move by Santander, with leading deals on both 2-year and 5-year products. Sub-5% lending is a significant move fuelled by the Bank of England hold on the base rate, and better-than-expected inflation figures. Competition in the market will mean that other lenders will follow throughout the week, as they all clamber for business in the run-up to Q4."

But for borrowers, added Campo, the speed with which rates are changing can be challenging: "This is a very challenging dynamic for any borrower who wants a fixed rate at present as you are effectively playing Whack-A-Mole with your application.”

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11 responses from the Newspage community

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Simon BridglandVerified
Director at Charwin Private Clients
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This week's mortgage market melee has formally started. I expect things to end up looking rather attractive by the time the week is out.
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Michelle LawsonVerified
Director at Lawson Financial
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This is great news for the industry and other lenders will have to follow. Hopefully we will start to see some confidence and stability return to the mortgage and property markets.
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Richard Campo
Founder at Rose Capital Partners
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Santander are just the latest lender to enter the hallowed ground of lenders who offer a mortgage 'that starts with a 4' and I feel they are far from being last. As money markets continue to fall, and lender competition hots up, I expect all major lenders to follow suit. This is a very challenging dynamic for any borrower who wants a fixed rate at present as you are effectively playing Whack-A-Mole with your application. The good news is that the recently introduced 'Mortgage Charter' means you can benefit from a rate cut if your existing lender lowers their rates prior to completion. Depending on where you are in the process, that may be an issue if lender B offers a better deal that you quality for, it may not be practical to re-apply to a new lender if you are too close to completion, typically 2-4 weeks depending on the lender. Therefore penalty free and/or variable rates may well be the way to go until pricing levels out.
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Riz MalikVerified
Independent Financial Adviser at R3 Wealth
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These are notable reductions from Santander, especially with 2- and 5-year fixed rates, but they won't be the only ones. As the market shifts in favour of borrowers, it's likely that other lenders will adjust their rates this week, too.
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Justin MoyVerified
Managing Director at EHF Mortgages
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This is a positive move by Santander, with leading deals on both 2-year and 5-year products. Sub-5% lending is a significant move fuelled by the Bank of England hold on the base rate, and better than expected inflation figures. Competition in the market will mean that other lenders will follow throughout the week, as they all clamber for business in the run-up to Q4.
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Stephen PerkinsVerified
Managing Director at Yellow Brick Mortgages
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Very positive reductions from Santander who are showing they are keen to fight for market share. It will be very interesting to see the next wave of rate reductions across the market in response.
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David StirlingVerified
Independent Financial Advisor at Mint Wealth
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This is great news and hopefully a sign of some normalisation. With rates coming down to a more attractive level and more competition among lenders to win business, this can only be music to the ears of borrowers.
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Elliott CulleyVerified
Director at Switch Mortgage Finance
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This will be likely the first of many lenders who change their rates this week. I would say this is still a cautious step and, while currently rate-leading, it won't be long before this is surpassed.
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James Bull
Mortgage Broker at JB Mortgages
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Sub 5% deals are very welcome and hopefully this will give some confidence to people who are otherwise delaying with purchases. I look forward to other lenders responding and hope rates settle around 4.5%.
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Peter Stamford
Mortgage Expert at Stamford Home Finance
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Santander have joined the rate reduction party with some discounting, some big some micro, but all welcome. I have a feeling this is going to be a very busy week for my inbox as others are bound to follow suit.
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Michael James Tilston
Director at The Mortgage Quarter
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In the current landscape, this move is a good sign that lenders are feeling some sort of stability in the market. With the Base rate being held it has given lenders confidence, in my opinion, that things are going in the right direction and are willing to be more competitive with their pricing!
As with every mortgage advice should be sought to make sure locking in for 5 years is the right thing to do as even though it is an attractive rate it may not be the best advice for all clients, this is why mortgage advice is so vital especially when lenders are reducing their rates as it may seem attractive now but might not fit all circumstances.