- Fixed rate mortgages have surged since start of March on Iran conflict
Two major high street banks have bucked the current trend by lowering rates on their mortgages.
From tomorrow, Santander will reduce many of its fixed rate and tracker deals by up to 0.3 percentage points.
TSB is also making some cuts, including reducing its two-year fixed rates aimed at home buyers by up to 0.45 percentage points.
However, most of the reductions are aimed at people buying homes and not those remortgaging.
Mortgage rates have risen sharply over the past six weeks as a result of market turmoil caused by the conflict in the Middle East.
Average two-year fixed rates were 4.83 per cent at the start of March. They are now 106 basis points higher at 5.89 per cent today.
On a £200,000 mortgage being repaid over 25 years, that’s the difference between paying £1,150 a month and £1,275 a month.
Buyer’s market: TSB and Santander’s mortgage rate cuts were aimed at first-time buyers and home movers, not those remortgaging
Average five-year fixes have risen from 4.95 per cent at the start of March and are 82 basis points higher at 5.77 per cent today.
Among Santander’s rate cuts are improvements for first-time buyers with deposits of between 5 and 15 per cent – with its rates reducing by up to 0.28 basis points.
The bank says its first-time buyer rates for those with a 15 per cent deposit will start from 4.9 per cent.
On a £200,000 mortgage being repaid over 25 years, that would mean paying £1,157 a month.
Mortgage broker Rohit Kohli, director at Romsey, Hampshire based The Mortgage Stop, said: ‘Remortgage borrowers will feel hard done by, because lenders are still showing more love to first-time buyers and home movers than they are to existing borrowers,’ said
‘It also tells you a lot about the market right now. We are now firmly in a buyer’s market, there is room for negotiation, and if you are a buyer in the right circumstances, there do look to be opportunities there.’
What are the best mortgage rates?
Nationwide is offering many of the lowest fixes at the moment priced from 4.66 per cent.
However, most banks are charging between 4.75 and 5 per cent for their two-year fixes.
Find your best rate using This is Money and L&C’s mortgage finder service.
Nationwide’s lowest three-year fix is 4.75 per cent and its lowest five-year fix is 4.8 per cent for borrowers with a 40 per cent deposit.
‘We have a rare bit of good news in the mortgage market with Santander announcing that it is lowering the price of its fixed and tracker rates,’ said Aaron Strutt of broker Trinity Financial.
‘These changes hopefully mean that some of the other lenders will bring their rates down a bit as well.’
Will mortgage rates start falling?
Craig Fish, director at London-based Lodestone Mortgages described the cuts as tactical rather than a turning point for rates as a whole, however.
‘They simply weren’t competitive enough to win new business at their previous rates, and this is them correcting that,’ Fish said.
‘Swap rates remain elevated and significantly higher than a year ago, so don’t hold your breath waiting for other lenders to follow. This isn’t a change in wind direction.’
Kohli added: ‘I’d be very wary of saying we’ve hit the peak,’ said Kohli. ‘Nothing has really changed. The war in the Middle East is still ongoing, Trump is still unpredictable, and there is no obvious sign that peace talks are getting anywhere. That is exactly why trying to call the next rate move is so risky.
‘I also do not see this as a clear good news story on rates. Santander had pushed pricing up quite hard in recent weeks and had started to look out of step with parts of the market.
‘This feels more like a reprice to get themselves back on the options list for borrowers, rather than a sign that rates are now firmly heading down.’