Best fixed mortgage rate drops below 1pc – again
Santander has brought back the sub-1pc mortgage, with a fixed-rate deal at 0.99pc. The bank is offering the loan to buyers with 40pc deposits – and will fix the rate for 18 months.
Previously HSBC offered a mortgage with the same rate but withdrew it in December, with many of its other best-buy deals.
Santander’s offer becomes the lowest fixed rate available – only beaten by Yorkshire Building Society. Its 0.98pc tracker mortgage is not fixed but will vary in line with Bank Rate.
Like many mortgages with very low rates, Santander’s deal comes with a relatively high fee of £1,499. This makes it less suitable for borrowers with smaller mortgages.
Previously its lowest rate was a two-year fix at 1.14pc, with a £1,495 fee. It also offers a rate at 1.29pc, for buyers with 40pc deposits, who would pay a fee of £999.
For someone borrowing £130,000 the monthly cost would be £495 during the fixed-rate period, compared to £511 under the old deal, including fees.
The 1.29pc deal is also fixed for six months longer, giving the buyer more security.
When the fixed period ends, borrowers are flipped to Santander’s standard variable rate, currently 4.49pc – and so are likely to need to remortgage again then.
If they don’t remortgage swiftly, the higher standard variable rate they revert to can rapidly erode the benefit of the lower introductory rate.
The lender has also dropped rates on several of its other mortgages. Its two-year fixed-rate mortgage for first-time buyers with 10pc deposits now has a rate of 2.24pc, with fees of £999.
Average two-year fixed mortgage rates fell to a 12-month low at the start of January and have been rising since. Analysts predict that they will now continue to rise.
Many lenders cut their rates at the end of the year in order to meet business targets but the cost of borrowing by banks, known as the swap rate, has been rising since last summer.