Barclays and Santander both cut their mortgage rates

Lenders Santander and Barclays have both cut rates on their fixed mortgages.

Santander UK has reduced some of its mortgage rates by up to 0.29 per cent from today – the second time it has made such cuts in 10 days.

Meanwhile, Barclays has made reductions of up to 0.3 per cent on some of its products.

It follows a series of rate reductions by many of Britain’s high street banks in recent days and weeks.

Homeowners will be hoping that mortgage rates have now peaked – although they still face near-record payments.

Cheaper: Santander has cut the interest rates on some of its mortgages

Santander has reduced the interest rates on mortgages for new customers by between 0.05 per cent and 0.29 per cent. Its previous cuts to rates were made on 4 August.

Examples of rates that have been reduced include a 25 per cent deposit home purchase mortgage on a five-year fix, which has been reduced to 5.30 per cent from 5.59 per cent. The rate comes with a £999 fee.

A comparable deal with no fee has been reduced to 5.46 per cent, down from 5.75 per cent.

On two-year fixes, a 25 per cent deposit purchase mortgage is available at 6.22 per cent, down from 6.49 per cent, with no fee.

Those with a 15 per cent deposit can get a two-year fixed rate purchase mortgage with a £999 product fee at a rate of 6.09 per cent, down from 6.27 per cent, with a £999 fee.

And a two-year fixed rate purchase mortgage with a 10 per cent deposit and no fee is now priced at 6.57 per cent, down from 6.69 per cent.

However, while Santander is cutting rates for its new mortgage customers, it has come under fire for hiking prices for existing homeowners on its ‘follow-on’ rate, who now pay more than 8 per cent interest.

Santander said no rate changes had been made to product transfer mortgages, trackers or buy-to-let mortgages.

Product transfer is when an existing customer takes out another mortgage on the same home with the same lender.

Anger at Santander follow-on rate hikes

Santander is cutting rates on its fixed-rate mortgages, but is raising rates for homeloans that rely on its ‘follow-on rate’.

This is currently 8.25 per cent, going up to 8.5 per cent at the start of September.

This rate is paid by customers who have left a Santander mortgage but did not switch lender since January 23, 2018.

Customers who fell off a Santander mortgage before that point are on its standard variable rate (SVR) of 7.5 per cent.

One Santander customer called the follow-on rate hike ‘disingenuous’ and questioned why the lender was advertising rate cuts for some loans but keeping quiet about price increases elsewhere.

Santander defends the hikes by saying its follow-on rate is not linked to Bank of England base rate, and that those on the follow-on rate can move to the lower SVR rate without charge.

Barclays has reduced mortgages in its new lending and ‘reward’ ranges by up to 0.3 per cent.

This includes a 15 per cent deposit mortgage on a two-year fix, which has been reduced from 6.96 per cent to 6.66 per cent. It is for existing customers doing a product transfer and has no fee.

A five-year fix for those with less than a 15 per cent deposit has been reduced from 7.03 per cent to 6.73 per cent. It is also fee-free and for product transfers.

Jamie Lennox, director at broker Dimora Mortgages said: ‘It’s great to see the last of the big six lenders move their fixed rate pricing downwards, although it’s disappointing to see how slow they’ve been to react with these reductions versus other lenders.

‘However, now Barclays have finally shown up to the party it can really get started with further reductions across the board, if another set of positive inflation data is released this week.’

Also today, specialist landlord mortgage lender Paragon has reduced its core two-year fixed rates by up to 0.45 per cent, with rates beginning from 4.85 per cent.

Banks have launched a mortgage price war in recent weeks that could bring some relief to embattled homeowners – with many high street names offering bigger cuts than Barclays’ or Santander’s.

Halifax, the nation’s largest lender, reduced the cost of its mortgages by up to 0.71 percentage points late last week.

NatWest also reduced its fixed rates by up to 0.65 percentage points on both two and five-year deals.

Virgin Money also repriced a range of remortgage deals, including cutting one 20 per cent deposit loan to 5.6 per cent.

Kellie Steed, Uswitch mortgage expert, said: ‘Despite the base rate rising to 5.25 per cent, lenders seem to be continuing with fixed-rate reductions across the board for the time being.

‘Although we may now see a slowing of rate reduction announcements until lenders have digested the new inflation data, due to be released by ONS on 16 August.’

Where are mortgage rates heading next?

As of last week, the average five-year fixed mortgage rate was is 6.35 per cent and the average two-year fixed rate was 6.84 per cent, according to Moneyfacts.

The reason for the widespread rate cuts is that the cost for banks to borrow money to lend to homeowners, known as the ‘swap rate’, has finally stopped rising amid signs that inflation is starting to ease.

Fresh inflation figures are being announced on Wednesday this week.

However, stronger-than-expected UK economic growth has increased the chances of more interest rate rises.

Mortgages: What you need to do

Borrowers whose current fixed rate deal is coming to an end face much higher costs and should explore their options as soon as possible.

Those who have agreed to buy a home should also check how much they can borrow and monthly payments and consider locking in a deal.

This is Money’s best mortgage rates calculator powered by L&C can show you deals that match your mortgage size and property value

What if I need to remortgage?

Borrowers should compare rates, speak to a mortgage broker and be prepared to act to secure the option of a new rate.

Anyone with a fixed-rate deal ending within the next six to nine months should look into the best rates they can get – and consider locking in a new deal. Often there is no obligation to take it.

With rates spiking right now, if you are planning ahead it is possible that they may fall by the time you need the mortgage. Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

Ask your broker about this and check if you are obliged to take the rate or could shift to a cheaper deal if rates fall before you take the mortgage out.

What if I am buying a home?

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.

Home buyers should beware overstretching themselves and be aware that house prices may fall from their current high levels, as higher mortgage rates limit people’s borrowing ability and buying power.

How to compare mortgage costs

The best way to compare mortgage costs and find the right deal for you is to speak to a good broker.

This is Money has a long-standing partnership with fee-free broker London & County to help readers find mortgages.

You can use our best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

Be aware that rates can change quickly, so compare rates well ahead of any deadlines and speak to a broker as soon as possible, so they can help you find the right mortgage for you.

> Check the best fixed rate mortgages you could apply for

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