Santander UK customers can get a free £250 cash payment as part of a new deal.
The bank has announced a major cut to rates across 70 of its mortgage products and introduced £250 cashback on low deposit deals.
Rates have been cut on selected fixed homeowner purchase and remortgage ranges by up to 0.23 percentage points, while a cashback payment of £250 is up for grabs on residential mortgages at 85% loan-to-value (LTV) and above.
Santander has also slashed rates on some of its other mortgage deals by 0.16 percentage points, including a buy-to-let range.
The bank said the new rates include a remortgage deal for borrowers with a 25% deposit at a rate of 4.30% on a five-year fix and a £999 fee. The rate on this deal has been cut by 0.23 percentage points.
Meanwhile, customers with a 15% deposit can get a house purchase mortgage with a rate of 4.69% or a two-year fix and a £999 fee. This rate has been reduced by 0.07 percentage points and £250 cashback has been added.
Graham Sellar, head of intermediary channels at Santander, said: “We’re pleased to deliver this bumper range of rate cuts across more than 70 products, alongside adding cashback for those looking at higher LTVs.”
According to financial information website Moneyfacts, across all deposit sizes the average two-year fixed homeowner mortgage rate is 5.47% and the average five-year fixed rate is 5.25%.
The new rates from Santander come ahead of the Bank of England’s next policy decision on Thursday, December 19 when it is expected that it will hold interest rates at the same level.
The UK’s base interest rate, which is currently 4.75%, influences how much banks charge for loans and mortgages.
The rate has been kept high in recent years in an effort to curb soaring inflation, but after inflation fell back below the Bank’s 2% target earlier this year, it announced a cut to rates in August and November. But October figures showed a jump back up to 2.3% – the sharpest rise in two years – with the rise in inflation attributed to high energy bills.
Despite two base rate cuts by the Bank this year, some mortgage rates have started creeping up due to swap rates, which lenders use to price their loans.
Economists say it is unlikely the Bank will make any change to its gradual approach to reducing interest rates this week.
Thomas Pugh, economist at the consultancy RSM, said: “Ultimately, that means mortgage holders won’t be getting an early Christmas present from the BoE this year. We expect four cuts in 2025, meaning rates will finish the year at around 3.75%, but the risks are weighted towards fewer rate cuts.”
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said the two-year fixed deals offered by Santander are “particularly competitive” right now and hopes other prominent lenders will make similar cuts in response.
She said: “It’s good to see a prominent lender making the decision to cut fixed mortgages and the two-year fixed deals from Santander are particularly competitive.
“Those borrowers who need a mortgage at a higher loan-to-value may be pleased to see a cashback incentive launched, however any deal should be weighed up by its overall cost.
“Santander’s two-year fixed mortgage at 85% loan-to-value has an impressive cost-saving package of a free valuation and £250 cashback. The deal does charge a fee of £999, but the fixed rate is a competitive 4.69%.”
