- Santander, NatWest and Barclays have reduced mortgage rates for first-time buyers.
- Deals are becoming more competitive for buyers with deposits as low as 5 per cent.
- More mortgage options are now available than at any point in recent years.
Mortgage rates for first-time buyers are starting to edge down as major lenders compete for new borrowers, offering some relief to those trying to get onto the property ladder. Santander, NatWest and Barclays have all announced cuts to selected deals, signalling a more competitive market for new homeowners.
Santander said it will lower first-time buyer rates by up to 0.32 percentage points across two, three and five-year fixed deals for buyers with deposits between 5 and 15 per cent. Fixed rates will start from 3.92 per cent for buyers putting down a 15 per cent deposit. On a £200,000 mortgage over 30 years, that would mean monthly repayments of around £946.
NatWest is also reducing its zero-product fee two-year fixed deals by up to 0.12 percentage points, with buyers putting down a 5 per cent deposit able to secure rates between 4.81 per cent and 4.69 per cent. Barclays has cut its two-year fixed rate for buyers with a 5 per cent deposit from 4.92 per cent to 4.6 per cent, which would equate to monthly repayments of about £1,025 on a £200,000 loan over 30 years.
Santander is also offering a five-year fixed rate of 4.72 per cent for buyers with a 5 per cent deposit and a 4.17 per cent five-year deal for those with a 15 per cent deposit, which includes a £999 fee. Rates for new-build buyers have also been reduced by up to 0.32 percentage points.
Competition heats up as options expand
The latest changes follow similar moves from other lenders, including Nationwide, which recently cut selected mortgage rates. Brokers suggest lenders are increasingly targeting borrowers with higher loan-to-value ratios, particularly those borrowing up to 95 per cent of a property’s value.
Samuel Mather-Holgate, managing director at Mather and Murray Financial, reportedly said major lenders appear to be focusing on higher loan-to-value lending and that rates could fall further if inflation eases, as quoted in a news report.
Louis Mason, content and communications director at Oportfolio Mortgages, reportedly said first-time buyers are a key focus for lenders at the moment, as quoted in a news report.
Data from Moneyfacts shows the number of mortgage products available to buyers with a 10 per cent deposit is at a record high, while those with a 5 per cent deposit have the widest choice since March 2008.
Santander has also introduced a product requiring a deposit of just 2 per cent, provided it is at least £10,000. Its five-year fixed ‘My First Mortgage’ deal comes with a rate of 5.19 per cent, no product fee and £250 cashback. A buyer taking out a £490,000 mortgage on a £500,000 property over 30 years would face monthly repayments of roughly £2,689.
A push to revive the market
Mortgage brokers say the wave of rate cuts points to an increasingly competitive environment as lenders look to stimulate activity. Richard Davidson, mortgage adviser at onlinemortgageadvisor.co.uk, reportedly described Santander’s reductions as particularly aggressive and said the lender appears keen to expand its presence in higher loan-to-value lending, as quoted in a news report.
Omer Mehmet, managing director at Trinity Finance, reportedly said lenders are actively targeting first-time buyers and that lower rates could help improve affordability for many borrowers, as quoted in a news report.
While borrowing costs remain higher than the lows seen earlier in the decade, the growing number of deals and gradual rate reductions suggest lenders are positioning themselves for a more active housing market as the year progresses.
