Santander is set to become the first major high-street lender to offer mortgages below four per cent this year.
The bank will introduce a range of two and five-year fixed residential mortgages at 3.99 per cent, available for both house purchases and remortgages.
The move comes after the Bank of England’s recent base rate reduction from 4.75 per cent to 4.5 per cent, sparking expectations of increased competition among lenders.
Santander’s announcement follows a surge in mortgage applications, with the bank reporting a 130 per cent increase in the fourth quarter of 2024 compared to the previous year.
Santander offers 3.99 per cent rate on two and five-year fixed deals
GETTY/PA
The new sub four per cent rates will be available to customers who can provide a 40 per cent deposit, marking a significant milestone in the 2025 mortgage market.
It is the first time since November the lowest residential fixed mortgage rates have dipped below four per cent.
The new 3.99 per cent residential purchase mortgages come with a £1,999 fee and are available at 60 per cent loan-to-value.
For those looking to remortgage, Santander offers the same 3.99 per cent rate on two and five-year fixed deals, though with a slightly lower fee of £1,749.
These rates represent some of the most competitive offerings in the current market, with only Lloyds Bank offering similar rates through their 3.98 per cent five-year fixed remortgage deal launched earlier this month.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “It was only a matter of time for lenders to bring back sub four per cent mortgages as a result of swap rates falling in recent weeks, coupled with a cut to bank base rate.
“This is a positive injection to the mortgage market and when a big lender makes such a move, it can prompt its peers to follow suit with cuts of their own.”
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Beyond the headline rates, Santander has announced reductions of up to 0.40 per cent across more than 80 other mortgage products, effective from Thursday.
The extensive rate cuts will impact residential purchases, remortgages, new build purchases, and buy-to-let mortgages.
The bank is also introducing new 65 per cent loan-to-value options for buy-to-let customers, expanding choices between 60 per cent and 75 per cent LTV.
New buy-to-let purchase mortgages at 65 per cent LTV include a two-year fixed rate at 4.35 per cent with a £1,749 fee, or 4.89 per cent with no fee.
Five-year fixed buy-to-let options are available at 4.32 per cent with a £1,749 fee, or 4.59 w per cent with no fee.
For buy-to-let remortgages at 65 per cent LTV, customers can access two-year fixed rates at 4.35 per cent with a £1,749 fee, or 4.89 per cent with no fee.
The five-year fixed remortgage options for buy-to-let come in at 4.25 per cent with a £1,749 fee, or 4.52 per cent with no fee.
David Morris, Head of Homes at Santander UK, said: “We’re delighted to launch a range of new products, along with rate cuts on our existing range, that will make a difference to customers across every stage of the home-buying journey.
Mortgage costs are likely to come down due to the base rate reductionGETTY
“From prospective buyers looking to get on the ladder for the first time, to landlords in the buy-to-let market, we’re proud to offer competitive products that help our customers reduce the overall cost of their mortgage.”
The changes come as millions of mortgage borrowers are looking to refinance this year.
Springall said: “The millions of mortgage borrowers looking to refinance this year need some good news, so it’s safe to say there are big expectations for more lenders to compete on price to entice new business in the coming weeks.”