Experts warn mortgage rates will be hit by Santander’s takeover of TSB: "Bad news for borrowers"

FINANCIAL experts have warned that mortgage rates will be hit by Santander’s takeover of TSB and it is “bad news for borrowers”.

It has been confirmed this week that Santander has agreed a £2.65billion deal to acquire the British bank from Sabadell.

There are fears TSB's high street banks could be closed - it currently has 175 branches in the UK and 5,000 employees.

TSB customers are not expected to notice any changes for a while with the deal likely to not be finalised until the first quarter of 2026.

Experts fear that mortgages rates could be hit with less competition giving consumers less choice.

Rohit Kohli, Director at The Mortgage Stop, said “Santander’s takeover of TSB is another red flag for market competition”.

He added: “Fewer big players means less pressure to offer better mortgage rates or reduce rates quickly - and that’s bad news for borrowers. As mortgage advisers, we must step up, championing smaller lenders who often offer competitive deals and excellent service. 

"These lenders can often match, if not beat, the big names - and it’s our job to scan the whole market to secure the best outcomes for clients. Savers should stay alert and regularly switch if their rate isn’t up to scratch. Loyalty rarely pays in this environment, and smart consumers will be the ones who keep moving.”

Tony Castle, Managing Director at PFG Mortgages, said the move “sets off some alarm bells”.

He continued: “It’s likely that the two lending operations may not be merged for some time yet. As mortgage advisers, It’s always good to have different lenders to utilise in the mortgage market with different pricing and criteria, which gives consumers more choice. 

"As such, it’s always a concern when banks create larger infrastructures and have more influence on the market.”

Justin Moy, Managing Director at EHF Mortgages, said mortgage rates could be hit.

He added: “The merger of any major high street lenders will inevitably lead to less competition, encouraging others to keep mortgage rates higher, and may also mean that some borrowers may now not qualify for a high street mortgage, if the TSB criteria had been favourable to them.

"Importantly, these mergers will inevitably see the larger lenders become even bigger and more influential, look to dominate the change in our industry and use their power to provide access to products without professional help from mortgage brokers. It is likely to be a trend that will continue for some time and other smaller lenders could easily be under attack given this wave of consolidation.”

Pete Mugleston, Mortgage Advisor & Managing Director at onlinemortgageadvisor.co.uk, agreed, adding: “The immediate consequence is the reduced competition in the market, which isn't great for borrowers. Less competition means less pressure to offer better products. 

"While there's no indication that other large banking groups are looking to acquire smaller players, it leads to less choice for borrowers and gives those firms more sway over the market. 

"Borrowers should use the services of a mortgage broker to find the best deals out there, as they aren't always with the major firms. That's what we're here for, and that's what we do day in and day out. Loyalty doesn't always pay, and a good broker can often find you a better deal than what your current lender is offering.”

Michelle Lawson, Director at Lawson Financial, said she feared it could lead to bank closures. 

She continued: “With this kind of consolidation, there are winners and losers. Jobs are at risk, branch closures will inevitably follow resulting in the more vulnerable communities having even less access to traditional banking facilities. 

"The winners will be the smaller banks and building societies as consumer choice narrows unless, of course, they get swallowed up by a larger competitor. Be savings savvy and don't be loyal as you don't even get a cheap carriage clock as a thank you any more.”