Major bank launches sub 4% interest mortgages in | European Markets

Santander UK is set to grow to be the primary high-street bank to offer a mortgage with an rate of interest below 4% this 12 months, unveiling 4 new offers.

From Thursday, February 13, the bank will introduce two- and five-year fixed mortgage choices at 3.99% for each residential buy and remortgage, out there for purchasers with a 60% Mortgage to Worth (LTV). Homebuyers will probably be supplied a £1,999 charge, whereas remortgagers will face a £1,749 charge.

The LTV ratio represents the share of a property’s worth being borrowed in comparison with the deposit paid by the client. For instance, with a 60% LTV, clients would supply a 40% deposit.

Moreover, Santander is reducing charges by up to 0.40% on more than 80 different mortgage merchandise. These reductions will apply to a wide selection of choices, together with residential purchases, remortgages, new construct purchases, and buy-to-let (BTL) purchases and remortgages.

The bank can also be increasing its BTL choices with new 65% LTV merchandise, offering more decisions for purchasers between 60% and 75% LTV.

David Morris, head of houses at Santander, stated: “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.”

The transfer follows the Financial institution of England’s choice to cut the central rate of interest from 4.75% to 4.5% final week. Brokers recommend this might mark the beginning of a “full-scale mortgage price war.”

Iain Swatton, director at Exemplar Monetary Companies stated: “Santander has fired the beginning gun, changing into the primary main lender in 2025 to go sub-4% on two- and five-year fixed mortgages.

“With rates of 3.99% at 60% LTV, this move could be the catalyst the market needs after a hesitant start to the year. Lenders have been cautious, with rates fluctuating both up and down—but this bold move by Santander might be the push needed to get things moving.”

He added: “Alongside their 0.40% reductions across a large number of products and new buy-to-let options, we could be looking at the start of a full-scale mortgage price war. With competition heating up, other lenders will no doubt follow suit—great news for borrowers looking for a better deal.”

David Hollingworth, associate director at L&C Mortgages said: “The improvement in the rate of inflation last month and recent rate cut seems to have reversed market anxiety about whether rates may have to stay higher for longer. That has been feeding through to mortgage rates in the last week and underlines gradual improvement in the market, as fixed rates begin to ease back.”

He warned debtors to be cautious of Santander’s charges. He stated: “These new rates are certainly a positive and the headline rate is bound to catch the eye. However, they come with a bigger fee of £1999 or £1749 for purchase and remortgage respectively.

“Borrowers will, therefore, need to keep their wits about them and do their sums to make sure that they are getting the best overall value.”

He added: “It will be those with large loans that will have the most to gain from the low rate, whereas those with smaller mortgages are likely to be better served by a lower or no fee and slightly higher interest rate.

“Lenders will generally have a range of rate/fee combinations on offer, so borrowers can tailor the deal choice to their own circumstances. Nonetheless, this marks a significant shift in rates, as Santander looks to force the pace.”

Nicholas Mendes, from unbiased mortgage advisor John Charcol, urged present swap charges imply there could possibly be “limited scope” for a lot of more brokers to observe swimsuit.

Mortgage market swap charges mirror the price lenders pay financial establishments to secure fixed-rate funds. These funds are used to offset the short-term dangers related to fixed-rate mortgages.

They’re usually based mostly on Authorities bonds known as Gilt yields, which mirror what the market anticipates will occur to rates of interest down the road.

Mr Mendes stated: “Currently, two- to five-year swap rates are below 4%, representing a notable decline compared to this time last month. However, with two-year swaps priced only marginally below this level, there is limited scope for other lenders to comfortably follow suit.

“As such, I do not expect many competitors to replicate this move. Without wider market support, this deal is unlikely to remain available for long – so it’s worth acting swiftly when opportunities like this arise.”