Barclays and Santander next major lenders to cut mortgage rates

Barclays and Santander have become the latest major lenders to cut mortgage rates.

The two banks join a total of 29 other lenders that have also slashed rates in 2024, according to Moneyfacts.

From tomorrow, Barclays will cut rates by up to 0.5 percentage points on products aimed at home buyers, including new best buys for two-year fixed rate deals.

Meanwhile, Santander will join a raft of lenders that are now offering sub-4 per cent rates. Its cheapest five-year fix at 3.89 per cent is aimed at those remortgaging.

Two more: Barclays and Santander have become the latest lenders to announce cuts to their mortgage rates

Justin Moy, managing director at EHF Mortgages says: ‘It’s been a month since Santander last repriced, but they have come back with a bang. 

‘Some of the rate cuts were needed to remain competitive, but the headline sub-4 per cent deals for both purchase and remortgage will have more appeal than the toffees in a tin of Quality Street. 

Moy adds: ‘These are also significant rate cuts by Barclays, both for those looking to buy with small and larger deposits. 

‘These will definitely be attractive to first-time buyers looking to take advantage of improving market conditions. The January mortgage fire sale is firmly underway.’

– Read: What next for mortgage rates in 2024 – and how long should you fix for? 

What are Barclays best mortgage deals? 

Most notably, its cheapest two-year fix, reserved for those buying with at least a 40 per cent deposit, is falling from 4.62 per cent to 4.17 per cent.

This will overtake The Co-Operative Bank’s 4.34 per cent deal and makes it the lowest rate on the two-year fixed rate market.

The average two-year fixed rate for those buying with at least a 40 per cent deposit is currently 5.41 per cent, according to Moneyfacts. 

Someone requiring a £200,000 mortgage to buy a property worth £350,000 might be eligible for the Barclays deal. 

If so, they’d end up paying £1,075 per month based on a 25-year term compared to paying £1,217 per month on the average rate.

Those with at least 25 per cent deposit also stand to potentially benefit from Barclays’ rate cuts. 

Its two-year fixed deal for a mortgage covering 75 per cent of a property’s value (75 per cent loan-to-value) is 4.2 per cent. 

Top of the two-year fixes: Barclays is cutting rates by up to 0.5 percentage points on products aimed at home buyers, including new best buys for two-year fixed rate deals

As for those with a 5 per cent deposit – most likely first-time buyers – Barclays has also improved its offering in that department.

Its two-year mortgage guarantee deal for those with a 5 per cent deposit is being cut from 5.8 per cent to 5.5 per cent, with no product fees attached.

Someone using this to buy a £200,000 property with a £190,000 mortgage could expect to pay £1,167 a month – if being repaid over 25 years.

It’s worth pointing out this Barclays deal is beaten by a number of other lenders. The Co-operative Bank is offering two-year fixed mortgages to those buying with a 5 per cent deposit at 4.99 per cent, albeit with £749 extra fees. 

‘This is a very significant move by Barclays,’ says Gareth Davies, director at South Coast Mortgage Services. ‘The best one we’ve seen in 2024 yet. 

‘To see two-year fixed deals edging this much closer to 4 per cent is not something many would have predicted a few months ago. 

‘With their capacity to handle large business volumes, too, this is a serious shift in the market and other lenders are going to lose a lot of business to them unless they also fall in line. Bravo Barclays.’

– True Cost Mortgage Calculator: Check what a new fixed rate would cost

What are Santander’s best mortgage deals? 

All Santander’s residential fixed rates are reducing by between 0.17 and 0.82 percentage points.

Its lowest rate is now its 3.89 per cent five-year for those remortgaging with at least 40 per cent equity in their home. This deal comes with a £999 product fee.

Someone remortgaging a £200,000 mortgage with 25 years remaining could expect to pay £1,044 a month on this deal.

For homebuyers with at least 40 per cent deposit, Santander will be offering a five-year fix at 3.94 per cent with a £999 fee. 

Existing Santander mortgage customers who are looking to refinance with the lender will also benefit from cheaper rates if they stick with the lender. This is what’s known as a product transfer.

Aside from that, Santander is also slashing rates by up to 0.56 percentage points for people buying new builds.

It has also slashed its two-year and five-year buy-to-let mortgage rates by up to 0.56 percentage points. 

Elliot Culley, director at Switch Mortgage Finance says: ‘Santander needed to react to other high street lenders’ rate cuts over the last week and these reductions will bring them in line with the more competitive products currently available to clients. 

‘Their headline rate is the five-year deal at 60 per cent loan-to-value which will certainly be the envy of the other mortgage lenders.’ 

How to remortgage your home: A guide to finding the best deal 

Will mortgage rates continue to fall?

Despite mortgage lenders seemingly embroiled in a mortgage rate price war, some mortgage brokers believe that rates are unlikely to go much lower.

This is to do with the fact that lenders tend to price their fixed rate mortgages based on future market expectations for interest rates.

Market interest rate expectations are reflected in swap rates. These swap rates are influenced by long-term market projections for the Bank of England base rate, as well as the wider economy, internal bank targets and competitor pricing.

Sonia swaps are used by lenders to price mortgages. Five-year swaps are currently at 3.61 per cent. Two-year swaps are now at 4.19 per cent.

Mortgage expert: Nicholas Mendes suspects the next rate change from the lenders who have announced cuts this week and last week will be upwards

This is slightly higher than they were at the start of the year, when five-year swaps were at 3.4 per cent and two-year swaps were at 4.02 per cent. 

In fact, one mortgage broker even believes that rates may be about to go up, rather than down.

Nicholas Mendes of mortgage broker John Charcol, says: ‘Gilt yields and Swaps moved up every day last week, and up again yesterday. 

‘With the gap narrowing, sub 4 per cent rates for a 5-year fix, or sub 4.5 per cent rates on a two-year fix, are no longer viable for lenders.

‘I suspect the next rate change from the lenders who have announced cuts last week will be upwards.

‘It will be interesting to see which lenders have enough appetite for volume, even at skinny margins, to hold on to their current low rates longest.

He adds: ‘The trajectory of downward pricing is happening a lot quicker than anticipated, so any pause in repricing is likely to be a small hiccup, rather than a sign of things to come.

‘What is important to stress is while markets seem stable, they are still prone to movement so anyone anticipating when the right time to fix is incredibly difficult.

‘Using a broker but also continually reviewing the market during your application will ensure you are on the best rate right up until completion.’