Residential, new build and buy-to-let borrowers rejoice!
Has this been a bumpy week, or what? We had the mischief night budget which international markets seemed to like for the first few minutes, seeing swap rates drop – then suddenly it looks like they thought no, this is a trick not a treat, and borrowing costs shot up.
As the UK financial markets continue to react to the turbulence, Santander has broken a trend of raising lending rates and has announced a reduction in mortgage rates across its residential, new build, and buy-to-let products, cutting rates by as much as 0.36%.
The rate adjustment affects various fixed-rate mortgage products, with rates now starting as low as 3.85%. These changes apply to home purchases and remortgaging, as well as green, new build, and buy-to-let mortgages. Graham Sellar, Santander’s Liverpudlian head of intermediaries, stated: “With some uncertainty in the market around mortgage pricing, it’s great to be able to offer borrowers access to lower rates across all of our residential, new build and buy-to-let mortgage products.”
Read more: Santander in shock move to delay results, shares plummet
These cuts have landed amid broader financial uncertainty. Recent rises in government bond, or gilt, yields - a critical indicator of borrowing costs - are affecting swap rates, which heavily influence fixed mortgage rates. Rising gilt yields have raised concerns that inflation will remain above target for the foreseeable future. The Office for Budget Responsibility (OBR), which raised a number of issues about the budget, also warned that now inflation will likely stick above 2%, possibly delaying any aggressive rate cuts from the Bank of England.
Read more: Santander starts slashing jobs
The wider financial context is further complicated by a recent landmark court ruling that has upended traditional lending practices. This ruling requires full transparency around commission payments to brokers in loan agreements, specifically those involving car financing. The Court of Appeal’s judgment mandates that lenders disclose any commission arrangements between brokers and loan providers, spotlighting hidden fees that could potentially result in significant compensation claims.
Santander, like other major lenders, is grappling with the implications of this ruling, which could impact how commissions are handled across various lending products. In light of this legal development, Santander has taken the unusual step of delaying its third-quarter financial results as it reviews potential financial repercussions. The bank is also addressing internal challenges by restructuring operations, including the planned elimination of 1,425 jobs, to enhance operational efficiency in a rapidly changing market.
Read more: Lending case contagion spreads as another bank stops asset finance
Analysts and mortgage brokers are monitoring the market closely for potential trends. Nicholas Mendes, of John Charcol, remarked on the significance of the OBR’s outlook on inflation, noting, “The OBR report makes for interesting reading, though several variables still need to play out…there's still uncertainty ahead.” Mendes added that upcoming announcements from the Bank of England could further shape mortgage pricing.
Santander’s move is definitely swimming against the trend, as other lenders like Virgin Money have opted to raise rates, underscoring uncertainty across the industry.
