"As money markets continue to fall, and lender competition hots up, I expect all major lenders to follow suit."
Santander has announced a range cuts to its fixed rate deals for both new and existing borrowers, launching a five-year fixed rate for purchase clients at 4.95% up to 60% LTV, and a sub-5.5% two-year fixed rate.
Available from tomorrow, two-year fixed rates will start from 5.43% at 60% LTV with a £999 fee.
As part of the changes, standard residential rates have reduced by up to 0.33%, new build fixed rates are down by up to 0.23%, large loan fixed rates are reducing by between 47-50bps, and buy-to-let rates have lowered by between 26-35bps.
In addition, residential product transfer rates have reduced by up to 0.36% and buy-to-let product transfers by up to 0.45%.
Newspage asked brokers for their views.
Simon Bridgland, director of Release Freedom, commented: “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.”
Richard Campo, founder of Rose Capital Partners, added: “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 Kite Mortgages, 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.”
Justin Moy, founder at 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 two-year and five-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.”