Barclays follows Santander by cutting mortgage rates below 4% triggering ‘domino effect’

Santander and Barclays have announced this week that it was to launch the new deals on Thursday, with borrowers able to get mortgage rates below 4% for the first time this year

Two major major high street lenders has slashed mortgage rates to below 4% for the first time this year with experts predicting a “domino effect” for deals going forward.

Barclays and Santander both announced cuts to some mortgage deals to below 4% this week. Santander said it was to launch the new deals on Thursday, with borrowers able to apply for one of four new products of two and five-year fixed-rate deals at 3.99%. However, eligible borrowers will need a 40% deposit to access them. The deals will be available to both home buyers and those looking to remortgage. The lender is also making reductions of up to 0.40 percentage points on more than 80 other mortgage products.

David Morris, head of homes at Santander UK, said: “We’re delighted to launch a range of new products, along with rate cuts on our existing range, that will make a difference to customers across every stage of the home-buying journey.”

Barclays announced rate cuts across its mortgage range – including a 3.99% 5-year fixed-rate product at 60% loan-to-value (LTV) from Thursday. The lender has also made reductions across its residential, buy-to-let, and remortgage products, with cuts of up to 0.40% on selected deals.

The move follows a cut in the Bank of England base rate last week, from 4.75% to 4.5%, fuelling hopes that competition between lenders to chop mortgage rates could heat up. Last week, six major lenders announced they were lowering mortgage rates ahead of the bank’s Monetary Policy Committee (MPC) decision on Thursday.

Barclays and Coventry Building Society lowered rates on Monday, followed by Halifax, HSBC and Clydesdale Bank who made changes on Wednesday, before Yorkshire Building Society lowered its rates on Thursday when the decision was announced. Earlier this week, NatWest cut some of its mortgage rates by up to 0.36%, which could “trigger a domino effect across the lending landscape,” according to Dariusz Karpowicz, director at Albion Financial Advice.

In comments to Newspage today, Daniel Hobbs, CEO at New Leaf Distribution said the Bank’s decision last week has “triggered frenzied activity” among lenders, adding: “The paralysis of the economy and the impact of the Budget yet to feed through in earnest suggests rates could go lower in the days and weeks ahead. January was a damp squib but February is shaping up to be a month of fireworks for borrowers and the broader property market.”

Craig Fish, Director at Lodestone Mortgages & Protection noted that consumers could soon be “sick of hearing the words rate war”, saying: “It certainly seems this is well and truly underway and something we will all hear more of. To see rates below 4% is a milestone, so let’s hope that swap rates continue their downward trend as this will lead to even lower rates by lenders. People can take their home buying plans off ice as the mortgage market starts its big thaw.”

Rohit Kohli, Director at The Mortgage Stop said the deals below 4% were “undoubtedly welcome” for the millions of borrowers coming off fixed rates this year. However, the focus on lower LTV customers means that the real affordability challenge – especially for first-time buyers – remains unaddressed. He said: “While it’s encouraging to see lenders passing on lower swap rates, the most significant impact would come from more competitive high LTV deals that help first-time buyers get on the property ladder. Until we see movement in that space, many aspiring homeowners will continue to struggle with affordability.”

Nicholas Mendes, Mortgage Technical Manager, at John Charcol, disagreed with the and says the swap market does not currently support further cuts. He said: “Currently, two to five year swap rates are below 4%, representing a notable decline compared to this time last month. However, with two year swaps priced only marginally below this level, there is limited scope for other lenders to comfortably follow suit.

“As such, I do not expect many competitors to replicate this move. Without wider market support, this deal is unlikely to remain available for long – so it’s worth acting swiftly when opportunities like this arise.”

He noted that Tuesday saw a “flurry of lender repricing” as many lenders responded positively to the recent “downward trend and stabilisation” in swap rates. He added: “While there remains considerable debate around the number of rate reductions we might see in 2025, forecasts made at this stage of the year are often subject to revision. New economic data and shifting global factors can significantly influence the outlook.

“Additionally, we are still assessing the full impact of the recent Budget, which can take time to filter through the market. Its important to keep in mind that while projections offer useful guidance, they are frequently adjusted as fresh information comes to light.”