Battle for market share continues as high street lenders continue downward pressure on mortgage rates
Santander is set to introduce a competitive two-year fixed-rate mortgage at 3.99% on Tuesday, the only offer of its kind under 4% as the growing contest among mortgage lenders continues. This product, which comes with a £999 fee and requires a 40% deposit, is its most affordable short-term rate since March 2023 - other lenders have mainly focused on five-year deals. The move follows a wave of reductions across the industry, with several five-year fixed rates dipping below 4%.
Although other mortgages offer lower rates, such as 3.77%, these require borrowers to lock in for five years, which could be a risk if rates decrease further in the near future. As competition intensifies, brokers expect that other lenders will soon follow Santander’s lead. "If Santander can offer a sub-4% two-year fix, other lenders will not be far behind," Aaron Strutt of Trinity Financial told The Independent.
The general expectation is for further global rate reductions in the near future – with some as soon as this week. Ray Boulger, senior mortgage technical manager at John Charcol, told The Independent’s online news site, “If the Bank of England does cut this time, it will be quickly followed by more mortgage rate reductions.” He added that even if rates hold, the trend of falling mortgage rates is likely to persist in the medium term.
While Santander’s 3.99% deal is poised to be the best short-term offer available, the bank is struggling to maintain its market share. According to recent data, Santander’s share of the UK mortgage market has dropped to just 6.7%, down from 11.4%, placing it behind larger players like Lloyds and HSBC. This decline comes at a time when many banks are jostling for position in a market showing early signs of recovery.
Santander’s current struggles echo those it faced in 2013, when it saw a major drop in its mortgage book. The bank is now fighting to regain ground in a competitive landscape. Lloyds remains the top mortgage lender with a 16.4% share, though it too has seen a slight dip, while HSBC has gained ground, overtaking Barclays to become the fourth-largest mortgage lender in the UK.
José García Cantera, Santander’s chief financial officer, remains cautiously optimistic. “We see a slight pick-up in demand and pressure to compete for that increased demand,” he said, adding that “the worst in the mortgage market in the UK is behind us.”
As the housing market begins to bounce back, with inquiries surging by nearly 20% since August, competition between lenders is expected to intensify. Property experts from Rightmove and Knight Frank predict a more active market this autumn, driven by lower rates and improved buyer sentiment. With even morel mortgage rates expected to dip below the 4% threshold, the battle for borrowers will only heat up further as Santander and other lenders push to capture more market share.
