Santander raises UK mortgage rates amid broader trends of rate reductions

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One of the UK's largest banks, Santander, has increased mortgage rates despite fierce competition among lenders in recent weeks.
One of the UK's largest banks, Santander, has increased mortgage rates despite fierce competition among lenders in recent weeks.

One of the UK’s largest banks, Santander, has increased mortgage rates despite fierce competition among lenders in recent weeks.

Santander’s Move Against the Grain

In contrast to wider trends, Santander has decided to increase rates by up to 0.20 percentage points on select fixed-rate mortgage products starting Wednesday. 

This comes as Nationwide and other lenders have been opting to reduce rates. Analysts suggest that despite concerns about inflation, a benchmark interest rate cut may still be anticipated later this year.

Context Amid Inflation Concerns

The decision by Santander follows recent official figures revealing an unexpected rise in inflation to 4% in December. Lenders, facing tight margins, may view rate adjustments as necessary in response to economic conditions.

Assurance to Borrowers and Future Rate Predictions

Elliott Culley, director of Switch Mortgage Finance, reassures borrowers, stating that this increase is not necessarily indicative of a broader trend. Predictions for the year suggest overall rate reductions despite occasional adjustments. 

Mortgage rates reached record highs in 2023 as the Bank of England increased interest rates to counter rising prices.

Impact of Previous Rate Hikes

While these rate hikes aimed to cool the economy and ease inflation pressures, they also resulted in challenges for borrowers. Homebuying became more expensive, contributing to what has been described as a cost-of-living crisis.

Relief for Existing Borrowers

Many existing borrowers with relatively cheap fixed-rate deals expiring this year are facing the prospect of more expensive deals. 

However, recent rate cuts by lenders have provided some relief. The average rate on a two-year fixed deal has decreased to 5.62%, down from 5.93% at the start of the year, according to Moneyfacts.

Nationwide’s New Products

Nationwide, the UK’s largest building society, recently introduced new products, including a five-year fixed-rate mortgage at 3.85% for new customers with a 40% deposit who are moving home. 

Despite rate adjustments, experts suggest that while rates may not be as cheap as before, they still represent significant improvements compared to previous highs.

Gary Monroe

Gary Monroe is a seasoned contributor to the Los Angeles Business Magazine, where he offers insightful analysis on local business trends and economic developments. With a focus on Los Angeles' dynamic commercial landscape, Gary's articles provide valuable perspectives for entrepreneurs and business professionals in the city.

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