Santander will cut mortgage rates for first-time buyers from Tuesday, trimming deals across its low-deposit range.
Two-year fixes for buyers with 5 to 15 per cent deposits, known as 85-95 per cent loan-to-value (LTV) are falling by up to 0.23 percentage points, three-year fixes by up to 0.32 percentage points, and five-year fixes by up to 0.17 percentage points.
The reductions will see the lender’s first-time buyer rates starting from 3.92 per cent, which it is offering on a two-year fix for those with a 15 per cent deposit.
It comes as numerous other lenders cut rates, jostling for position amid expectations of further reductions to the Bank of England’s base rate this year.
Omer Mehmet, managing director at brokerage Trinity Finance, described the first-time buyer mortgage market as “officially on fire”.
He said that lenders are actively targeting this demographic and that the result is a “huge win” for those seeking to get onto the ladder.
He added: “Affordability is being improved almost by the day right now and it’s shaping up to be a busier than usual spring property market.”
The cuts come at the same time as Santander is making some rate hikes for customers with big deposits.
Why are rates falling for first-time buyers?
Emma Fildes, a property buying agent at Brick Weaver, said banks were being nudged to “lend more for less” as the Government seeks to kick-start a housing market held back by high borrowing costs and economic uncertainty.
Speaking to The i Paper, she explained: “Lenders have been keen to drum up business, reducing rates and deposits amounts to engage first-time buyers.”
Mortgage experts have also said expectations of a base rate cut had, had an impact on sending swap rates, which lenders use to determine mortgage rates, downwards.
The base rate currently sits at 3.75 per cent with the next decision meeting to be held on 19 March.
“With anaemic GDP growth and inflation waning, a base rate cut in March is back on the cards; if not, April is almost a certainty. It looks like the mortgage market is heating up for first-time buyers just as the property market enters full swing in Spring,” said Lewis Shaw, a broker at Shaw Financial Services.
At the last meeting, the Monetary Policy Committee (MPC) held the rate following a five-to-four vote. There are eight reviews a year to control inflation and support economic growth.
Lowest low-deposit mortgage rates
Though Santander has become the latest big bank to slash mortgage rates for first-time buyers, even cheaper rates are available.
For those with just a 10 per cent deposit, the cheapest rates available across the whole of the UK are:
West Brom Building Society – 3.99 per cent, £1,499 fee, two-year fix Progressive Building Society – 4 per cent, £995 fee, two-year fixFor those with a 5 per cent deposit, the cheapest rates are:
Co-Operative Bank – 4.47 per cent, £999 fee, two-year fix Progressive Building Society, 4.53 per cent, £0 fee, two-year fixWhat other cuts are happening?
David Hollingworth, of L&C Mortgages, agreed that lenders have maintained a focus on first-time buyers recently and are often offering sharper rates to those in this category and those buying a new home.
Nationwide made some cuts on Friday, with new deals dropping as low as 3.54 per cent.
The building society confirmed that rates across two, three- and five-year products will fall by up to 0.16 per cent.
TSB was another lender to make selected rate cuts to its residential range last week.
These include a 0.1-percentage point cut to its two-year-fixed house purchase mortgage and a 0.05-percentage point cut to its five-year-fixed house purchase mortgage to 85 per cent LTV.
Barclays have too recently announced that it will make some improvements to some of its purchase products on Tuesday, but these will come with some price hikes as well.
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