Santander is poised to withdraw its most affordable five-year mortgage option following the recent inflation data, which exceeded expectations. The bank will be removing its 3.99 percent fixed-rate mortgage from the market as of Friday, February 22, at 10 PM. Although this deal was launched just last week, financial experts had cautioned that it may not last long in the current economic climate. These concerns were heightened after the latest inflation figure surged to 3 percent, prompting an increase in swap rates—key indicators used by lenders to set mortgage prices.
Currently, Santander’s 3.99 percent two-year fixed mortgage, which remains the cheapest option available, is still accessible for borrowers.
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For those interested in a five-year fixed mortgage, the leading deal is offered by Barclays, also priced at 3.99 percent. Aaron Strutt from Trinity Financial remarked, “Santander has seen an influx of applications for its sub-4 percent rates. Given the recent spike in funding costs, it was only a matter of time before the bank decided to withdraw some of its products.” He further noted that the rise in swap rates following the inflation announcement puts additional pressure on lenders.
Mr. Strutt anticipates that further hikes may be on the horizon: “I suspect that some fixed-rate mortgages will gradually increase, and it may take a while for rates to decline again.”
David Hollingworth, an associate director at L&C Mortgages, added, “The recent news regarding the uptick in inflation implies that some of the most competitive fixed mortgage rates could soon be at risk. It hasn’t taken long for this trend to materialize. The Co-operative Bank has also announced its intention to temporarily withdraw certain fixed-rate options by the end of tomorrow.”
“While the movement in swap rates has not been dramatic, it appears sufficient to jeopardize some of the lowest rates currently available. There’s no need for panic, but borrowers contemplating a new deal should consider making a decision sooner rather than later to avoid potential rate increases.”
Inflation rose from 2.5 percent to 3 percent, as reported by the Office for National Statistics (ONS) on Wednesday, marking a more significant rise than economists had anticipated. Increased inflation could prompt the Bank of England to maintain higher interest rates for an extended period. Traders are now betting against any chances of rate cuts in March.
Experts believe that the combination of this inflation increase, alongside unexpected wage growth reported on Tuesday, could lead to the disappearance of the best mortgage deals and delay the emergence of new, affordable options.
However, some lenders continue to lower their rates. Nationwide has announced a reduction of selected fixed rates by 0.33 percent effective Friday, while Halifax is cutting rates by 0.2 percent. Homeowners and first-time buyers are encouraged to consult a mortgage broker to secure the best rates available.
Should You Secure a Fixed Rate Now?
If your current mortgage is approaching its expiration date, it is advisable to begin exploring new deals approximately three months in advance. Most lenders allow borrowers to lock in a new rate several months before it takes effect, enabling you to secure a rate now even if your existing deal concludes in May. This way, if rates increase, you will have a more favorable deal locked in, and if rates decline, you can opt for an even cheaper option later.
Another viable option is to consider a tracker mortgage, which adjusts in line with the Bank of England’s base rate. If the base rate decreases, your payments will lower; conversely, if it rises, your payments will increase. Although tracker mortgages are typically more costly than fixed options, they provide flexibility, allowing borrowers to wait for potentially lower fixed rates in the future.
