A renewed mortgage price war has arrived in the UK market, with Santander leading the charge by launching two‑ and five‑year fixed‑rate deals at 3.99% for borrowers with 40% deposits. This bold move followed the Bank of England’s decision to cut its base rate from 4.75% to 4.5%, sparking hopes that competition among lenders would intensify. Lloyds Bank quickly answered back with a five‑year fixed remortgage at 3.98%, while Barclays reduced some two‑ and five‑year deals from over 4.1% to 3.99%. For first‑time buyers and those remortgaging, the return of sub‑4% mortgages offers an opportunity to lock in lower costs—provided they understand deposit requirements, product fees and market timing.
Introduction: Sub 4% Deals Make a Comeback
After months without broadly available fixed rates under 4%, Santander’s 3.99% launch marks the first sub‑4% products from a major high‑street lender in 2025. Eligible customers need a 40% deposit or significant equity to qualify, reflecting lenders’ cautiousness about credit risk. The Bank of England’s base rate cut to 4.5% has encouraged lenders to pass on savings, igniting what many expect to be a full‑scale home‑loan price war.
Mortgage Rate Price War
Santander Sparks the Price War
From Thursday 13 February, applicants could access four new two‑ and five‑year fixed products at 3.99% for both purchase and remortgage, at 60% loan‑to‑value (LTV). David Morris, Head of Homes at Santander, said the move would “make a difference to customers across every stage of the homebuying journey”. By positioning itself as the first major lender with sub‑4% deals, Santander has reset borrower expectations and triggered rapid reactions from competitors.
Competitors Follow Suit
Lloyds Bank responded with a five‑year fixed remortgage at 3.98%, targeting those looking to refinance existing loans. Barclays cut its two‑ and five‑year fixed rates from 4.11% and 4.12% down to 3.99%, reducing costs by up to 0.38 percentage points. David Stirling of Mint Mortgages & Protection noted that “the general feeling is that other major lenders will follow suit this week”.
What This Means for First Time Buyers
Sub‑4% deals are especially attractive to first‑time buyers keen to minimise monthly outgoings. However, the 40% deposit requirement remains a barrier for many, underscoring the importance of saving strategies and government help‑to‑buy options. With April’s stamp duty relief for first‑time buyers reducing (nil‑rate band dropping from £425,000 to £300,000), acting quickly could save around £2,500 on stamp duty costs for an average home.
Implications for Remortgaging Borrowers
More than 700,000 UK households are due to remortgage in 2025, many facing substantial rate rises when their deals expire. While sub‑4% options mitigate some of the pain, average product fees have climbed to about £1,121—borrowers must weigh rate savings against upfront charges. CeMAP Mortgage Advisers should run total‑cost comparisons, including fees and early‑repayment charges, to find genuinely best‑value deals.
Tips for Advisers and Borrowers
- Assess LTV and Deposit: Verify whether clients can meet LTV criteria; higher deposits unlock the lowest rates.
- Factor in Fees: Average product fees exceed £1,000—always calculate break‑even periods to see how long a deal must run to justify the fee.
- Monitor Swap Rates: Market swap rates influence new‑business pricing. As Rachel Springall of Moneyfacts reminds us, “It’s only a matter of time before sub‑4% mortgages return en masse”.
- Timing and Stamp Duty: First‑time buyers should act before April’s stamp duty changes; remortgagers may benefit from locking in deals ahead of peak demand.
Conclusion: A Renewed Battle on Rates
Santander’s 3.99% campaign has reignited competition, prompting rapid moves from Lloyds, Barclays and others. For buyers and CeMAP mortgage advisers, the challenge is to balance ultra‑low headline rates against deposit hurdles, fees and market fluctuations. Those who navigate these factors confidently can secure sub‑4% mortgages that deliver genuine savings in 2025.