Santander cuts mortgage rates with first-time buyer deals being slashed most

Santander has cut mortgage rates for those buying homes with smaller deposits, despite the expectation that the Bank of England will hold interest rates at 4.25 per cent tomorrow.

The changes are aimed at first-time buyers and home movers with a 5 per cent or 10 per cent deposit. 

The mortgage rate cuts will be up to 0.22 percentage points.

The new products are available to all customers, whether they are applying via a broker or directly.

Santander’s lowest five-year fix for first-time buyers will now charge 4.85 per cent with no fee and £250 cashback.

On a £200,000 mortgage being repaid over 25 years that would cost £1,152 a month.

Cutting: Santander has today reduced its mortgage rates by up to 0.22 percentage points

Home movers can do slightly better, with Santander offering a 4.78 per cent rate – again with no fee and £250 cashback.

There are slightly lower rates on the market, but these tend to come with higher fees. For example, Monmouthshire Building Society is offering a 4.75 per cent rate with £1,379 of fees. 

Nationwide is also offering a 4.79 per cent five year fix at 4.79 per cent with £999 of fees.

Buyers can compare rates and fees using This is Money’s mortgage calculator. 

First time buyers with a 10 per cent deposit can secure a five-year fix at 4.47 per cent with Santander with a £999 fee and £250 cashback.

Home movers with a 10 per cent deposit get a market-leading 4.4 per cent rate with Santander, albeit with the same fees.

The next best deal after that is Virgin Money charging 4.44 per cent for its five-year fix, with a £995 fee. 

Alongside the 90 per cent and 95 per cent mortgage products, Santander is also cutting deals for home movers buying with 15 per cent deposits.

It is also cutting the rate on its lowest five-year fixed rate remortgage deal for those refinancing with at least 40 per cent equity in their home. 

Homeowners can now remortgage to a rate of 3.96 per cent with Santander, which includes fees of £1,058.

That compares to NatWest, which offers 3.95 per cent and a £1,554 fee or HSBC, which offers a 3.99 per cent deal with a £1,008 fee.

Peter Stimson, director of mortgages at the lender MPowered suggests that mortgage rates are unlikely to fall any further for the time being.

‘When it comes to interest rates, inflation has morphed from a blip into a block,’ said Stimson. 

Peter Stimson, director of mortgages at the lender MPowered

‘That’s why the prospects of the Bank of England cutting its base rate again tomorrow – already very slim – have evaporated.

‘The swaps market – which mortgage lenders use to set the interest rates they offer on new loans – is already implying that there will be just one further cut to the base rate this year.

He added: ‘For anyone planning to buy their first home or remortgage this summer, who’d been assuming that the only way is down for mortgage interest rates, this week’s inflation data will have been an uncomfortable reality check.

‘Mortgage rates may well have fallen as far as they can for now, and in the coming weeks rates may even creep up back as lenders recalibrate in response to rising swap rates.’