Major bank cuts mortgage rates after Bank of England interest rates decision
A MAJOR bank is to slash its mortgage rates after the Bank of England decided not to hike interest rates again.
Santander has announced rate reductions and new deals after the central bank decided to hold the current base rate at 5.25%.
The BoE base rate is often used by high street banks to set the rates they offer to customers on things like loans, savings and mortgages.
So the decision not to increase rates further could take the edge off the affordability pressures buyers are currently facing.
Plus, swap rates, which underpin fixed mortgage rates, have now stabilised amid expectations that inflation may have peaked.
Santander is launching a 4.95% 60% loan-to-value (LTV) five-year fixed rate mortgage tomorrow.
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The LTV is the amount you need to borrow on top of your deposit.
It comes as Moneyfacts said the average five-year fixed mortgage rate currently stands at 6.04%.
Meanwhile, the high street bank is also set to launch a 5.43% 60% LTV two-year fixed rate mortgage tomorrow.
The average for a two-year fix currently stands at 6.55%, according to MoneyFacts.
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Both of Santander's new mortgage deals fall below the average rates.
Plus, the lender is also set to reduce all residential fixed rates by between 0.1% and 0.36%.
Michelle Lawson, director at Lawson Financial said more cuts are likely as other lenders look to follow Santander's lead.
Nationwide already slashed its mortgage rates following the BoE's interest rate decision last week, cutting up to 0.31% across its fixed rate products.
She said: “This is great news for the industry and other lenders will have to follow.
"Hopefully we will start to see some confidence and stability return to the mortgage and property markets.”
Meanwhile, David Walsh, director at London-based broker Kite Mortages, said competition in the market would be good news for homeowners and first-time buyers.
According to trade association UK Finance, around 800,000 fixed-rate mortgage deals are due to end in the second half of this year and 1.6 million are due to end next year.
David said: “With swap rates coming down, this is clearly now being passed onto end borrowers, which is great news.
"There is always competition between lenders who all have targets to meet, so they will want to be as competitive on price as they can be, whilst maintaining their margins.”
How to find the best mortgage rates
Getting the best rate on a mortgage depends on what's on the market at any given time.
That said, there are a few ways you can land a good deal.
In most cases, the larger the deposit you have the lower the rate you can get.
If you're remortgaging and your loan-to-value ratio has changed this could also give you access to better rates than before.
Your loan-to-value ratio is the ratio of what you borrow on a mortgage against how much you paid as a deposit.
For example, if you get a £160,000 mortgage to buy a £200,000 home, the loan-to-value is 80%.
If your credit score improves or your salary goes up this can see you offered better mortgage rates too.
And if you're nearing the end of a fixed deal soon it's worth looking for a new one.
You can sometimes lock in current deals up to six months before your current deal ends.
Before this point you will usually have to pay an early exit fee.
But, depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal.
Make sure you compare the costs first to figure out where you might save the most money.
Meanwhile, you can find the best deal using a mortgage comparison tool. This will show you what's available out there.
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Or, you could use a mortgage broker can compare deals for you.
They may charge you for the service but should be upfront with you about the costs.
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