The move follows a wave of cuts across the industry, with several five-year fixed rates dropping below 4%
Santander is set to introduce a competitive two-year fixed-rate mortgage at 3.99% on Tuesday, the only offer of its kind under 4% as the growing competition among mortgage lenders continues.
This product, which comes with a £999 fee and requires a 40% deposit, is its most affordable short-term rate since March 2023 – other lenders have mainly focused on five-year deals. The move follows a wave of cuts across the industry, with several five-year fixed rates dropping below 4%.
Although other mortgages offer lower rates, such as 3.77%, these require borrowers to lock in for five years, which could be a risk if rates decline further in the near future. As competition intensifies, brokers expect that other lenders will soon follow Santander’s lead.
If Santander can offer a sub-4% two-year fix, other lenders will not be far behind, Aaron Strutt of Trinity Financial told The Independent.
The general expectation is for further global rate cuts in the near future – with some as soon as this week.
Ray Boulger, senior mortgage technical manager at John Charcol, told The Independent’s online news site, if the BoE does cut this time, it will be quickly followed by more mortgage rate cuts. He added that even if rates hold, the trend of declining mortgage rates is likely to persist in the medium term.
While Santander’s 3.99% deal is poised to be the best short-term offer available, the bank is struggling to maintain its market share. As per recent data, Santander’s share of the UK mortgage market has declined to just 6.7%, down from 11.4%, placing it behind bigger players such as Lloyds and HSBC.
Lloyds remains the top mortgage lender with a 16.4% share, though it too has seen a slight decline, while HSBC has gained ground, overtaking Barclays to become the fourth-biggest mortgage lender in the UK.
José García Cantera, Santander’s chief financial officer, remains cautiously optimistic. We see a slight rise in demand and pressure to compete for that increased demand, he said, adding that the worst in the mortgage market in the UK is behind us.