Banks in England and Northern Ireland are witnessing a surge in mortgage applications as homebuyers rush to secure potential savings ahead of changes in stamp duty discounts. The urgency stems from upcoming reductions in the "nil rate" band for first-time buyers, which will decrease from £425,000 to £300,000, and for other homebuyers, from £250,000 to £125,000 starting in April.
The situation has been further intensified by a recent cut in the Bank of England's base rate, which dropped from 4.75% to 4.5% last week. This reduction has sparked expectations of increased competition among lenders, prompting them to lower their mortgage rates. In response, Lloyds Bank unveiled a five-year fixed remortgage deal at 3.98% earlier this month, while Santander became the first major lender in 2025 to offer sub-4% fixed mortgage rates.
Santander is set to offer two- and five-year fixed rate deals at 3.99%, aiming to attract borrowers with a 40% deposit or substantial equity. This development marks a significant shift in the mortgage market landscape, as money market swap rates have decreased recently, allowing for the return of sub-4% mortgages.
Iain Swatton, director at Exemplar Financial Services, remarked that Santander has "fired the starting gun" on a price war in the home loans sector.
"fired the starting gun" on a home loans price war – Iain Swatton, director at Exemplar Financial Services
Meanwhile, Rachel Springall from Moneyfacts noted that it was "only a matter of time" before such competitive rates returned.
“only a matter of time” before sub-4% mortgages returned – Rachel Springall, at financial data provider Moneyfacts
The introduction of these new products and rate cuts on Santander's existing offerings are expected to have a positive impact on homebuyers at various stages. David Morris, head of homes at Santander, emphasized that these changes would "make a difference to customers across every stage of the homebuying journey."
“make a difference to customers across every stage of the homebuying journey” – David Morris, head of homes at Santander
The recent fluctuations in fixed mortgage rates underscore the dynamic nature of the market, influenced by both economic policies and competitive forces among lenders. The availability of sub-4% mortgage deals provides an opportunity for eligible borrowers to secure more favorable terms as they navigate the evolving real estate landscape.