SANTANDER is cutting its mortgage rates in a “rare flash of good news” for borrowers – but brokers warn “don’t expect it to last” in a “yo-yo” market.
On Friday May 22, Santander is reducing selected residential and buy-to-let rates.
Its first-time buyer 85%, 90% and 95% Loan to Value (LTV) fixed rates are reducing by up to 0.23% while its product transfer buy-to-let 60% and 75% LTV 2- and 5-year fixed rates are reducing by up to 0.10%.
Data yesterday showed inflation was down more than expected to 2.8% in the year to April from 3.3% in the year to March.
This comes as NatWest announced it is increasing rates across its full range yesterday, given the ongoing conflict in Iran, and the Labour Government leadership process, which is bringing further uncertainty to the markets.
Brokers welcomed the cuts from Santander, but cautioned against any suggestion that this is the general direction of the market as uncertainty reigns.
There’s a risk some borrowers will believe rates will continue to edge down
Shaun Sturgess, Director at Swansea-based Sturgess Mortgage Solutions, said borrowers shouldn’t expect rates to keep coming down.
He added: “A big lender cutting rates is great news but there’s a risk some borrowers will believe rates will continue to edge down, especially given that Wednesday’s inflation data fell more sharply than expected.
“The inflation data is a wolf in sheep’s clothing for borrowers, as it masks the full impact of the fuel crisis caused by events in the Middle East and the fact that inflation could rise sharply over the summer. That could send rates higher rather than lower.”
Omer Mehmet, Managing Director at Welling-based Trinity Finance, said many are confused about where rates are going.
He added: “It’s hard for anyone to know where rates are going right now. This week we’ve had one major high street lender, NatWest, raise rates while another has brought them down. The lower rates that many borrowers are holding out for are by no means guaranteed.”
Riz Malik, Independent Financial Adviser at Southend-on-Sea-based R3 Wealth, said the news is positive.
He added: “These are some decent reductions from Santander, and there have also been favourable movements in the financial markets that impact fixed-rate pricing.
“Every little helps at the moment for those looking to move or refinance their existing borrowing. It’s also good to see reductions in trackers as well as fixed rates.”
A rare flash of good news
Martin Rayner, Mortgage broker and financial adviser at Compton Financial Services, said there are many factors that lead to a lender raising or lowering rates.
He added: “Swap rates may be moving around a lot, but lenders do not price mortgages on swaps alone. Business levels matter just as much. If a lender needs applications, rates come down. If they become too busy, rates can rise quickly to slow demand and protect turnaround times. Markets are extremely sensitive at the moment.
“Political uncertainty, global tensions and UK economic data are all creating volatility, which makes predicting the next movement in swap rates very difficult. That does still increase the chances of more lenders adjusting rates over the coming weeks.
“If you are remortgaging, secure a deal as early as possible, ideally up to six months before your current rate ends. You can normally switch to a lower rate later if the market improves further. Secure the safety net first. Then benefit from any reductions afterwards.”
David Stirling, Independent Financial Adviser at Belfast-based Mint Wealth, said this decision contradicts the direction of travel in the market.
He added: “Santander has done the unthinkable and actually cut its mortgage rates, putting it firmly at odds with the prevailing mood on the high street.
“NatWest spent yesterday morning hiking rates across its full product range, while the Bank of England sits on its hands at 3.75% muttering ominously about rate rises to come, the market is doing its level best to make homeownership feel like a punishment. Santander’s cuts are a rare flash of good news. Just don’t expect it to last.”
Santander is firmly at odds with the prevailing mood on the high street
Ken James, Director at London-based Contractor Mortgage Services, described it as a “yo-yo market”.
He added: “It’s hard enough for us mortgage brokers to keep up so imagine how confusing this yo‑yo market must feel for anyone trying to buy right now. Santander has announced fresh rate reductions, while at the same time other lenders are pulling products entirely because funding costs are swinging all over the place. The contrast is huge, and the volatility is real.
“We are seeing reducing swap rates, which is a genuinely positive sign and could help drive further cuts. But the honest truth is we simply can’t say whether this trend will last because the market is moving too fast for anyone to call it with confidence. What does the future hold? No one knows and that includes the professionals who live and breathe this every day.”
Aaron Strutt, Product and Communications Director at London-based Trinity Financial, said Santander must have realised its competitors had better deals.
He added: “Santander’s latest price improvements are good news especially as the lender reduced many of its mortgage rates by 0.2% just over a week ago. Even though Santander’s rates are reasonably priced, Nationwide’s lowest two-year fixes start from 4.35% and its five-year fixes from 4.44%.
“If Santander wants to get more business it probably realised its rates need to come down a bit because of the increasing levels of competition between the major lenders. Halifax and Barclays still have sub-4% trackers. Even with the generally poor economic news and global instability there is still a fairly strong demand for property and mortgages.
“There were expectations that rates were going to rise in recent weeks, but the opposite has happened. Mortgages have got cheaper and they look better value for money, although NatWest has pushed up some of its rates. More of our clients are taking trackers because they expect the base rate will have to come back down over the near term.”
Photo by Eric Prouzet on Unsplash.
