Table of Contents
- Withdrawn transactions include Santander’s market-leading 3.68% five-year fixed
Santander has temporarily withdrawn a number of its mortgage deals in a further sign that home loan prices may start to rise again.
From 10pm tonight, the bank says it will withdraw eight fixed rate deals, including its market-leading 3.68 per cent five-year fixed rate.
He says he will relaunch these agreements starting next Tuesday. However, one mortgage expert suspects the relaunch will come with higher rates.
Nicholas Mendes, mortgage technical manager at broker John Charcol, said: “I suspect this ‘temporary withdrawal’ means the lender will pause, review and restart at a higher rate.”
> What’s next for mortgage rates in 2024?
Smokescreen? Santander says it will temporarily withdraw some fixed rates at 10pm tonight and reactivate them next Tuesday. But one mortgage expert suspects this will happen with higher rates.
If correct, this means that Santander’s five-year fix of 3.68 per cent will cease to exist from tonight.
This was available to house-movers and first-time buyers with deposits of at least 40 per cent.
This will leave Barclays as the lowest five-year fixed deal on the market at 3.71 per cent.
In addition to the temporary withdrawal of its market-leading agreement. Santander is also removing its five-year 3.92 per cent fix for those buying with a 25 per cent deposit.
Those who buy with a 15 per cent deposit will also lose access to their 4.15 per cent five-year fix.
> Best mortgage rates for first-time buyers
Why is Santander temporarily withdrawing operations?
Mortgage lenders price their fixed mortgage rates based on Sonia swap rates, funding targets, borrower demand and general economic sentiment.
Sonia swaps are the easiest way to interpret where fixed rates are headed.
Simply put, Sonia swap rates essentially show what lenders believe the future will hold with respect to interest rates.
When Sonia swaps rise high enough, it often results in fixed mortgage rates rising and vice versa when they fall.
In recent weeks sonia swaps have risen again. As of October 9, two-year swaps were at 4.05 percent and five-year swaps at 3.79 percent.
This marks an increase compared to September 20, when two-year swaps were at 3.82 percent and five-year swaps were at 3.52 percent.
Expert: Nicholas Mendes, mortgage technical director at brokerage John Charcol, suspects this “temporary withdrawal” means Santander will relaunch at a higher rate
Mendes believes a major factor behind Santander’s product recalls could well be profit margins and pricing.
“Lenders set mortgage rates based on market factors such as swap rates, which influence the cost of financing fixed-rate mortgages, and competitive offers,” Mendes said.
‘Normally, lenders set mortgage prices a fortnight in advance. If market conditions change during that period (for example, if swap rates increase), a previously profitable product may no longer make financial sense.
‘In such cases, the lender may withdraw the product to avoid offering a mortgage that could result in financial loss.
‘After reassessing the market, they are likely to reprice the product upon re-entry, often with a higher interest rate or modified terms to restore profitability.
However, Mendes also says that Santander’s decision could be due to service levels and high demand from borrowers.
“If a mortgage product is too competitive in the market, meaning that the lender’s offer is more attractive than others, this can lead to an increase in applications,” Mendes added.
‘While high demand appears positive, it may impact the lender’s ability to process applications efficiently.
‘To maintain good service levels and ensure applications are processed in a timely manner, the lender may need to temporarily withdraw the product to manage its workload.
“Once they catch up, they will be able to reintroduce the product, potentially at the same pace or with adjusted conditions.”
> Best buy-to-let mortgages for landlords
