Santander and Co-operative Bank withdraw some of the lowest fixed-rate deals
Homebuyers and homeowners looking to remortgage may find it harder to secure a sub-4% mortgage from Friday, as Santander UK and the Co-operative Bank are set to withdraw some of their most competitive fixed-rate products due to shifting market conditions.
Santander UK confirmed on Thursday that from 10pm on 21 February, it will remove its 3.99% five-year fixed-rate mortgage deals from sale. The move comes just over a week after launching the product, following an increase in five-year swap rates, which are used by lenders to price mortgages.
This decision means that both the 3.99% five-year fixed-rate mortgage at 60% loan-to-value (LTV) for homebuyers and the 3.99% five-year fixed-rate for remortgaging homeowners will be pulled from the market. However, Santander will continue to offer two-year fixed-rate mortgages at 3.99%, requiring a 40% deposit or equity.
Market uncertainty and inflation pressures
The withdrawal of these products follows a stronger-than-expected inflation report from the Office for National Statistics (ONS). Data released on Wednesday revealed that the Consumer Prices Index (CPI) inflation rate rose to 3% in January, up from 2.5% in December. The increase was higher than analysts’ forecasts of 2.8%, raising concerns about the pace of inflation reduction.
Although Santander remains optimistic about future Bank of England base rate cuts later this year, mortgage experts had already warned that sub-4% deals may be short-lived.
David Hollingworth, associate director at L&C Mortgages, commented:
“Yesterday’s news of the increase in the rate of inflation meant that some of the lowest fixed mortgage rates on the market could be under threat. That hasn’t taken long to feed through, and Santander has announced that it will be withdrawing its five-year fix at 3.99% at the end of tomorrow, citing an increase in market rates as the driver.”
The Co-operative Bank has also announced that it will temporarily withdraw some of its fixed-rate mortgage products from Friday.
Mixed reactions from other lenders
While Santander and the Co-operative Bank are withdrawing low-rate deals, other lenders are responding differently to market movements.
Nationwide Building Society has announced that it will reduce mortgage rates by up to 0.33 percentage points from Friday. This means that its five-year fixed-rate mortgage at 60% LTV, with a £1,499 fee, will now stand at 4.09%, down from 4.14%.
Carlo Pileggi, Nationwide’s senior manager for mortgages, said:
“These latest reductions bring five-year and two-year fixed rates closer together.”
Similarly, Barclays has introduced improvements in its existing customer mortgage products, while Halifax has also announced that it will cut some of its rates.
More Read
What this means for borrowers
Despite the removal of some sub-4% deals, experts say that borrowers should not panic. However, those considering locking in a new mortgage deal may need to act quickly before further rate changes take place.
David Hollingworth added:
“Although the movement in swap rates has not been enormous, it does look to be enough to put some of the very lowest rates in peril. It’s not a need for panic, but borrowers that have been considering a new deal may want to reach a decision sooner rather than later in case of more movement in rates.”
While the Bank of England is still expected to lower interest rates later this year, the timing and extent of these cuts remain uncertain. Mortgage rates are likely to continue fluctuating in response to economic data, inflation figures, and market expectations.
Looking ahead
The mortgage market remains highly fluid, with lenders adjusting their products based on economic indicators and market conditions. While some of the lowest rates may disappear for now, future base rate cuts could bring more competitive mortgage deals in the months ahead.
Borrowers are advised to keep a close eye on mortgage rate changes and, where possible, seek advice from mortgage brokers to secure the best deal for their circumstances.
