SANTANDER is the first major lender to reduce selected fixed and tracker rates by up to 0.3% following the huge spike in rates due to the war in the Middle East.
But brokers said this is more the lender falling into line with the rates of competitors rather than a “market signal”, with one adding “I’d be very wary of saying we’ve hit the peak”.
For new applicants, Santander will be reducing selected first-time buyer (FTB) and home mover fixed rates by up to 0.28%, while large loan home mover fixed rates will come down by up to 0.12%. Rate reductions of up to 0.25% will also apply to selected buy-to-let purchase fixed rates.
Selected tracker rates will also be reduced by up to 0.30% for FTBs and home movers, and up to 0.15% for home movers taking out large loans.
Meanwhile, across product transfers, all 80% and 85% loan-to-value (LTV) 1, 2, 3 and 5 year residential fixed rates will come down by up to 0.19%; and all 90% and above 90% LTV 1 and 2 year residential fixed rates will reduce by up to 0.25%. Across buy-to-let (BTL), all 2 and 5 year fixed rates above 75% LTV will be reduced by 0.10%.
Santander says there are no changes to residential or BTL remortgage rates or tracker rates across its product transfer range. The news comes as Moneyfacts revealed the average shelf-life of a mortgage is currently at a record low of eight days.
Swap rates remain elevated
Craig Fish, Director at London-based Lodestone Mortgages described the cuts as tactical rather than a turning point for rates as a whole.
He said: “Santander’s rate reductions are welcome, but let’s be clear, this is a business decision, not a market signal. They simply weren’t competitive enough to win new business at their previous rates, and this is them correcting that.
“Swap rates remain elevated and significantly higher than a year ago, so don’t hold your breath waiting for other lenders to follow. This isn’t a change in wind direction.
“That said, right now is genuinely a buyers’ market. Motivated sellers and thinner buyer pools means there are real bargains to be had for those who get off the fence and act. This is a good incentive to do exactly that.
“As for remortgage customers being left out, well lenders know those borrowers are already on their books and less likely to walk, so competitive pricing gets directed at new business. This is frustrating but a commercial reality.”
Nothing has changed
Rohit Kohli, Director at Romsey-based The Mortgage Stop, agreed: “I’d be very wary of saying we’ve hit the peak. Nothing has really changed. The war in the Middle East is still ongoing, Trump is still unpredictable, and there is no obvious sign that peace talks are getting anywhere. That is exactly why trying to call the next rate move is so risky.
“I also do not see this as a clear good news story on rates. Santander had pushed pricing up quite hard in recent weeks and had started to look out of step with parts of the market. This feels more like a reprice to get themselves back on the options list for borrowers rather than a sign that rates are now firmly heading down.
“Remortgage borrowers will feel hard done by, because lenders are still showing more love to first-time buyers and home movers than they are to existing borrowers.
“It also tells you a lot about the market right now. We are now firmly in a buyer’s market, there is room for negotiation, and if you are a buyer in the right circumstances, there do look to be opportunities there.”
Strategic alignment
Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer, is another broker not reading too much into these cuts: “Santander’s move to trim mortgage rates might grab headlines, but it’s more of a strategic alignment than a market-shifting ‘wave’ that will gain momentum. They are simply catching up with the pack rather than leading a charge of lower mortgage rates.
”The reality remains grimly anchored to geopolitics. With the Strait of Hormuz effectively closed since March, the price of oil has surged and with it the inflationary threat. As long as this vital energy artery is blocked, the widespread reductions many hope for will remain a mirage. Expect high street lenders to stay cautious until the global energy shock subsides.”
Shaun Sturgess, Director at Swansea-based Sturgess Mortgage Solutions, is another sceptic: “This is a re-price in line with the wider market rather than the beginning of a reversal in rates and the peak. The situation in the Middle East remains too volatile for lenders to consider cutting rates in earnest for now. A huge and inflationary energy shock is still very real and lenders will be very alive to that fact.”
Borrower-friendly market?
But one broker, Harry Goodliffe, Director at HTG Mortgages, believes this could be the first sign of a reversal of recent rate hikes.
He said: “This could be the first hint that borrowing costs are nearing their peak and lenders may be gaining confidence. Reducing fixed and tracker products suggests improving conditions and a softer outlook on future interest rates.
“However, a lack of relief for remortgaging tells a slightly different story. Lenders remain wary of the risk they already have on their books and are less motivated to compete for those customers.
“This looks less like a full market reversal, but a first small tentative step towards a more borrower-friendly market. Some much-needed welcoming news for buyers.”
