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Mortgages under 4 per cent have returned to the borrowing market after the Bank of England slashed its rates last week.
Santander said that from Thursday, borrowers will be able to apply for one of four new products as it launches a range of two and five-year fixed-rate deals at 3.99 per cent.
Eligible borrowers will need a 40 per cent deposit to bag the new rates, available for house purchase or remortgaging.
The new deals include a two or five-year fixed rate at 3.99 per cent for home buyers, with a £1,999 fee.
A similar deal is also available for homeowners looking to remortgage, with a £1,749 fee.
The move follows a cut in the Bank of England base rate last week, from 4.75 per cent to 4.5 per cent, fuelling hopes that competition between lenders to chop mortgage rates could heat up.
Santander UK also said on Tuesday that it had recorded a 130 per cent increase in mortgage applications in the fourth quarter of 2024 compared with the same period a year earlier, as some home-buyers sought to potentially save themselves thousands of pounds in stamp duty costs.
From April, stamp duty discounts will become less generous, with the “nil rate” band for first-time buyers reducing from £425,000 to £300,000 and other home-buyers seeing a reduction from £250,000 to £125,000.
Stamp duty applies in England and Northern Ireland.
Exemplar Financial Services director Iain Swatton said Santander had “fired the starting gun” on a possible mortgages price war by moving back to sub-4 per cent.
“We could be looking at the start of a full-scale mortgage price war. With competition heating up, other lenders will no doubt follow suit,” he said, per the Guardian.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “It was only a matter of time for lenders to bring back sub 4 per cent mortgages as a result of swap rates falling in recent weeks, coupled with a cut to bank base rate.
“This is a positive injection to the mortgage market and when a big lender makes such a move, it can prompt its peers to follow suit with cuts of their own.
“The millions of mortgage borrowers looking to refinance this year need some good news, so it’s safe to say there are big expectations for more lenders to compete on price to entice new business in the coming weeks.”
Ms Springall said that in terms of the sub-4 per cent rates currently available on Moneyfacts’ records, Lloyds Bank has a five-year fixed remortgage deal priced at 3.98 per cent which it launched earlier this month.
David Hollingworth, associate director at L&C Mortgages said: “These are the first standard rates from a high street lender to drop below 4 per cent since last November and deals are available to both buyers and those remortgaging.
“The improvement in the rate of inflation last month and recent rate cut seems to have reversed market anxiety about whether rates may have to stay higher for longer.
“That has been feeding through to mortgage rates in the last week, and underlines gradual improvement in the market, as fixed rates begin to ease back.
“These new rates are certainly a positive and the headline rate is bound to catch the eye.
“However, they do come with a bigger fee, of £1,999 or £1,749 for purchase and remortgage respectively.
“Borrowers will therefore need to keep their wits about them and do their sums, to make sure that they are getting the best overall value.
“It will be those with large loans that will have the most to gain from the low rate, whereas those with smaller mortgages are likely to be better served by a lower or no fee and slightly higher interest rate.
“Lenders will generally have a range of rate/fee combinations on offer, so borrowers can tailor the deal choice to their own circumstances.
“Nonetheless this marks a significant shift in rates, as Santander looks to force the pace.”
Nicholas Mendes from broker John Charcol said: “Today has seen a flurry of lender repricing, with many responding positively to the recent downward trend and stabilisation in swap rates.
“While there remains considerable debate around the number of rate reductions we might see in 2025, forecasts made at this stage of the year are often subject to revision.
“New economic data and shifting global factors can significantly influence the outlook.
“Additionally, we are still assessing the full impact of the recent Budget, which can take time to filter through the market.
“It’s important to keep in mind that while projections offer useful guidance, they are frequently adjusted as fresh information comes to light.”
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