Santander Increases Mortgage Rates | will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be Scamsmart.

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Derin Clark

Derin Clark

Online Reporter
Published: 29/10/2021

This week, Santander increased the rate on its two year fixed mortgage deals so that it no longer offers sub-1% rates on any of its mortgage products.

The rate increases comes at a time when many finance experts are predicting that the Bank of England will increase base rate by the end of this year from its historic low of 0.1%. If the base rate rise does take place, it will make borrowing more expensive, but normally a rise would not directly impact some mortgage deals until months after the increase takes place.

On Tuesday 26 October, Santander increased 10 two year fixed rate deals by up to 0.34%. The deals impacted ranged from between those requiring 40% to 25% equity or deposit. Within its five year fixed deals, nine have seen rate rises by up to 0.37%.

Along with increasing rates, on some deals Santander has also increased the required equity or deposit needed to apply for the mortgage, as well as increasing the product fee. Some cashback incentives have also been removed.

Will other lenders increase mortgage rates?

The past few months has seen mortgage rates fall to record lows, but lenders may now start to become more risk averse as the threat of base rate rise remains and the possible negative impact rising inflation could have on the economy, which could see more lenders increase rates as a result. Competition within the mortgage market, however, remains strong so lenders may continue offering low rates to attract new borrowers or keep existing mortgage borrowers on their books.

Even if lenders do not follow Santander’s lead in increasing mortgage rates, it is unlikely that rates will fall lower than their current record lows. As a result, mortgage borrowers on their lender’s standard variable rate (SVR) or coming to the end of a fixed rate deal should consider switching onto a fixed mortgage deal sooner rather than later.

Should borrower’s fix into a long-term mortgage deal?

Mortgage borrowers looking for a new fixed rate deal may be tempted by the lowest rates being offered on two year fixed deals, but a long-term deal of five, or even 10, years may be a better option for some borrowers.

Homeowners who are planning to stay in their current property for five years or more may be better off choosing a slightly higher rate on a five year deal as, even if base rate does not rise this year, it is unlikely that the Bank of England will keep interest rates at its current record low for the long-term.

A rise in base rate will result in the cost of borrowing increasing, which will likely lead to rates on mortgage deals also rising. This means that, although the rate on a five year fixed rate deal may look unattractive today, in three years’ time the rate could be lower than those available on two year fixed deals. Meanwhile, some homeowners may want to take advantage of the current competitive rates on 10 year fixed rate deals, however those considering a mortgage deal for this length of time should ensure that the mortgage can be ported to a new property or they may risk paying costly exist charges if they want to move home.


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