Santander ups mortgage rates despite fierce competitionon January 23, 2024 at 11:16 pm

- Advertisement -
- Advertisement -
- Advertisement -
- Advertisement -

The bank’s small increase comes as other major lenders are cutting rates amid fierce competition.

People looking at houses for sale in an estate agents window in Cirencester, GloucestershireImage source, Getty Images

One of the UK’s biggest banks, Santander, has raised mortgage rates despite fierce competition among lenders in recent weeks.

Santander will nudge up rates by up to 0.20 percentage points on some fixed rate products from Wednesday.

It bucks wider trends with Nationwide among the latest to reduce rates.

Analysts said they still expect the benchmark interest rate to be cut this year despite worries about inflation.

The move by Santander came after official figures recently showed that inflation, which measures the rate at which prices rise, unexpectedly ticked up to 4% in December.

“Lenders’ margins at the moment are tight, so this increase will be expected,” said Elliott Culley, director of Switch Mortgage Finance.

“Borrowers should not panic as its unlikely this will be a trend and overall across the year, predictions are for rates to fall further”.

Mortgage rates hit record highs in 2023 as the Bank of England raised interest rates in an attempt to rein in rising prices.

In theory, by making borrowing more expensive and dissuading people from taking out loans, such moves cool down the economy, easing pressures pushing up prices.

But the higher interest rates also led some landlords to increase rents and made homebuying more expensive, exacerbating what has been described as a cost-of-living crisis.

About 1.6 million existing borrowers have relatively cheap fixed-rate deals expiring this year and are facing the prospect of more expensive deals.

More recently, however, as prices have eased, many lenders have been cutting rates, providing some relief.

The average rate on a two-year fixed deal has dropped to 5.62% compared with 5.93% at the start of the year, according to financial information service Moneyfacts.

“While rates are not as cheap as they used to be, they are significantly better than they were”, said Aaron Strutt from Trinity Financial.

“We have been saying for a while that rates may start to level off and there may not be many more price reductions for a while, but the pricing improvements keep coming”.

Britain’s biggest building society, Nationwide, on Wednesday said that its new products would include a five-year fixed-rate mortgage at 3.85% for new customers with a 40% deposit who are moving home. The deal has a £1,499 fee.

But its chief economist, Robert Gardiner, warned that upheaval in the Red Sea was “part of a broader picture of uncertainty”, and could pose a “serious risk” to inflation in the UK if it starts to impact trade significantly.

Some analysts said that Santander’s move to raise rates might be precautionary, amid predictions that the Bank of England may not cut rates as early as some have forecast.

A Santander spokesman said that the lender “reviews its rates based on a number of factors, such as wider market conditions including swap rates”, which are a leading indicator for mortgage rates.

- Advertisement -




Friskney attempted murder arrest after two boys, 10, stabbedon November 30, 2022 at 11:46 am

A woman is arrested on suspicion of attempted murder after the boys were hurt in a nine-hour stand-off.A woman has been arrested on suspicion...

Reading and Leeds festivals: Fans receive refunds after uproaron August 19, 2022 at 10:50 am

People angry at acts like Måneskin pulling out of the festivals say they have got their money back.Image source, Getty ImagesMusic fans angry at...

Ian Poulter: LIV Golf player taking legal action against Scottish Open banon July 4, 2022 at 8:03 pm

Ian Poulter says he is "fighting for his right to play golf" and confirmed he is taking legal action against his ban from this...

What UK aid cut means for one South Sudan hospitalon July 21, 2022 at 11:39 pm

One of the few doctors serving 1.3 million people may have to leave because he would lose his salary.One of the few doctors serving...

David Carrick: Met Police officer raped by ex-policeman will be at his sentencingon February 6, 2023 at 5:59 am

The officer, who asked to remain anonymous, was raped by Carrick while the pair were working together.The officer, who asked to remain anonymous, was...