Santander has become the latest lender to cut its mortgage rates, while also adding new incentives to attract first-time buyers, but some experts warned that the price war may be coming to an end.
The lender - one of the “big six” that dominates the UK mortgage market - cut its residential and buy-to-let rates by between 0.02 percentage points and 0.2 percentage points.
In addition, Santander added new exclusive offers for first-time buyers, with a cashback option and no product fee.
The UK’s top lenders have been cutting mortgage rates after they rose dramatically from May to July, with all of the “Big Six” having cut prices on multiple occasions.
But some experts warned that the decline could not last forever, especially after an unchanged core inflation figure sent expectations for the peak Bank of England interest rate higher again. Some smaller elders have already begun raising interest rates again.
Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial, warned that prices could go up again soon.
“Lenders are still trying to attract new business by cutting rates for borrowers, but this won’t last,” he said. “Whilst new lending has nearly dried up, lenders have the appetite to take on borrowers with little margin in their pricing, but with inflation staying high and a central bank more likely to increase rates rather than cut them, rates won’t continue to be cut for much longer.
“Until the Bank of England starts cutting rates, which should be later this year, borrowers face uncertainty around which direction the cost of borrowing money will go.”
Daryl Dhoffer of The Mortgage Expert also warned that prices could rise again soon.
He said: “You can only commend lenders’ action on the rate reductions we’re currently seeing. You get the impression that escalated rates over the past 8 weeks have been reactive, and we are now seeing similar rate reductions. It will be interesting to see how long these rate reductions carry on for. I suggest make hay while the sun shines, as next month could be a lot different.”
However, Mike Staton director at broker Staton Mortgages, was more optimistic.
“Lenders are desperate to claw back missed mortgage opportunities over the previous year due to overcautiousness because of the economic situation we find ourselves in,” he said. “We may see further withdrawals of products closer to the announcement of the BOE base rate, especially if inflation fails to continue dropping.
“At the moment these rate reductions are as much about corporate high-fiving whilst the majority of the general public are still struggling to keep a roof over their head and food on the table.”
