Another reduction keeps interest rates falling as bank battles for market share
Santander has faced a challenging year. In May, the bank, which is owned by Spanish parent company Banco Santander, disclosed that a security breach had compromised the personal information of 30 million customers and employees. Alongside this, profits have taken a hit, and recent data indicates a repeat of the difficulties Santander encountered back in 2013, when its mortgage lending book experienced a significant decline.
Despite these setbacks, Santander has been proactive. It became the first lender to lower its rates following the Bank of England’s recent interest rate cut. However, the competition within the mortgage lending market is intensifying. Numerous banks and other lenders are reducing rates to gain a larger share of the market, particularly from bigger players like Santander.
The UK mortgage sector is becoming increasingly competitive as the housing market and broader economy show early signs of recovery. Santander isn't the only bank experiencing a dip in market share—Barclays has also been impacted, recently losing its position as the fourth-largest mortgage lender in the UK. In response, Barclays has been focusing on what it describes as strategic initiatives aimed at improving financial stability and optimising its operations.
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And given that background, Santander has shown that it is not going to just lay down and let its mortgage lending competitors roll all over it. Today the bank has introduced what some are calling the most competitive mortgage rate available in the UK market, making waves with its new 3.68% five-year fixed-rate deal.
This marks a significant step as mortgage rates have been steadily declining, in part due to expectations that the Bank of England will enter a base rate cutting cycle. The return of rates below 4% is a key development, with experts predicting that they could stabilise around 3.5% over the next year or two.
The new deal from Santander, aimed at residential buyers with a 60% loan-to-value (LTV), comes with a £999 fee, and represents a cut from its previous rate of 3.8%. In addition, Santander has reduced rates across other products, with some two-year fixed deals now dipping just below 4%, also for 60% LTV.
This follows Santander’s broader rate cuts, which were announced on October 4. These include reductions on new build fixed rates, green residential mortgages, and buy-to-let remortgages.
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Specifically, standard residential fixed rates for both purchases and remortgages, including green options, have been lowered by as much as 0.29%. Additionally, all new build rates have been cut by up to 0.19%, while buy-to-let fixed rates, including green remortgages, have seen reductions of up to 0.17%.
Customers who have yet to accept a product transfer offer can still switch to these new deals. However, those who have already agreed to a new rate can only make changes or cancel their current offer if done at least 14 days before the start of the new agreement. It’s important to note that no other changes to a mortgage, such as moving to an interest-only plan for six months or increasing the term, can be made while a product transfer is in progress.
