The UK’s property market is witnessing an intense competition among mortgage lenders, with major players like Santander and Skipton making significant cuts to their mortgage rates. This move, seen by many as a reflection of the ongoing price war in the mortgage industry, is great news for prospective buyers and investors. It indicates more affordable borrowing options, potentially leading to increased property investment opportunities. Let’s break down what these rate cuts mean for average individuals looking to invest in property.
Santander Leads with Competitive Cuts
Starting from today, Santander, the UK’s fourth-largest mortgage lender, is implementing rate cuts on various mortgage products. This includes a substantial reduction of up to 0.56 percentage points on residential fixed rates for both new and existing customers.
Understanding Tracker Mortgages
Among the products seeing rate reductions are Santander’s residential tracker deals, which are all set to experience a 0.1 percentage point cut. It’s crucial to understand that tracker mortgages are directly linked to the Bank of England Bank Rate. They work by adding a fixed margin above the Bank Rate. For instance, if the Bank Rate is 5.25%, and the tracker deal’s margin is 1 percentage point, the actual rate you’d pay would be 6.25%. If the Bank Rate drops to 5%, the tracker rate adjusts down to 6%. This means if the Bank of England lowers its rates, your mortgage payments could decrease accordingly.
New Deals for Homeowners and Investors
For those considering a remortgage, Santander now offers five-year fixed rates starting at 4.94%, accompanied by a £999 fee, assuming a 60% loan-to-value (LTV) ratio. In simpler terms, LTV is the percentage of the property’s value that you’re borrowing, with the rest typically covered by your deposit. A lower LTV usually means better rates, as it’s less risky for lenders.
Buy-to-let investors haven’t been left out; they’ll see rate reductions of up to 0.32 percentage points on fixed deals. For instance, new customers can now access two-year fixed rates starting at 5.57% with a £1,749 fee, and five-year rates from 5.04%, both based on a 60% LTV.
Santander is also introducing a special offer for new customers and those transferring products: a series of three-year fixed rate deals without any fees. These deals begin at a 5.18% rate, assuming a 60% LTV.
Skipton Building Society Joins the Fray
Not to be outdone, Skipton building society has announced its own sweeping rate reductions across a variety of products, effective from 9 am today. These include residential, buy-to-let, and government scheme products for first-time buyers.
Special Products for Renters and First-Time Buyers
Significantly, Skipton has reduced the rate on its “Track Record” mortgage to 5.89%. This unique product is intended to assist renters in entering the property market. Additionally, they’ve implemented cuts of up to 0.22% on 70 residential products, up to 0.33% on 16 buy-to-let products, and a notable up to 0.30% on 25 government scheme products. These government schemes encompass shared ownership and Lifetime ISA deals, designed to make property investment more accessible.
More Lenders Follow Suit
Rate Cuts Across the Market
Several other mortgage lenders are following in Santander and Skipton’s footsteps. Principality building society, for example, is cutting its fixed rates for residential and buy-to-let borrowers by up to 0.25 percentage points starting tomorrow, 25th October. This includes selected residential rates in the 75% to 90% LTV range, as well as deals under the Help To Buy program.
Bank of Ireland is also set to implement rate cuts from tomorrow, particularly targeting its Bespoke buy-to-let mortgage rates. Its two-year fixed rates will start from 5.49% with a £1,995 fee (60% LTV), and the equivalent five-year fixed rates will reduce to 5.05%.
Additionally, LendInvest is making its own aggressive cuts, reducing fixed rates by up to 0.45 percentage points and reintroducing a five-year fixed rate with a high 90% LTV at 6.29%.