In a shock move for mortgage borrowers, Santander has yanked its ultra-competitive 3.99% five-year fixed rate just days after launching it.
The withdrawal, which took effect at 10pm on Friday, February 21, follows a sharp rise in finance institution borrowing costs, however the bank is keeping its keeping it two-year 3.99% fix- at least for now.
The now-scrapped deal had been one of the lowest available, covering both new home purchases and remortgages.
Affected products include:
New business: 60% loan-to-value (LTV) five-year fixes at 3.99% (with fees of £1,749 for remortgages and £1,999 for purchases).
Product transfers: 60% and 75% LTV five-year fixes at 3.99% with a £1,749 fee.
The news has left borrowers scrambling to lock in the best remaining rates before they disappear.
Aaron Strutt, product and communications director at Trinity Financial, warned: “Santander was inundated with applications for its sub-4% rates. With funding costs rising, it was only a matter of time before this deal was pulled.”
Santander’s move leaves Barclays as the last major lender still offering a 3.99% five-year fix – but experts fear it won’t be available for long.
Why is this happening?
Mortgage rates are heavily influenced by Sonia (Sterling Overnight Index Average) swap rates – a key measure of future borrowing costs between banks. When swap rates rise, lenders have to adjust their fixed-rate mortgages accordingly.
As of February 18, five-year Sonia swap rates stood at 3.93%, slightly down from 4.04% a month ago. However, recent inflation data has sent shockwaves through the market, putting pressure on lenders to reassess their rates.
David Hollingworth, associate director at L&C Mortgages, explained: “The latest inflation figures mean some of the lowest fixed mortgage rates are now under threat. It didn’t take long for Santander to react.”
Meanwhile, Co-operative Bank has also announced a temporary withdrawal of some fixed-rate products, adding to concerns that this is just the start of a wider shake-up.
What happens next?
Despite this turbulence, there’s still hope for borrowers. HSBC, Barclays, Nationwide, and Halifax have hinted at possible rate reductions. Meanwhile, long-term expectations suggest the Bank of England could cut its base rate later this year – but the timing remains uncertain.
For now, mortgage hunters need to act fast. As Strutt warns: “There is still time to secure Santander’s best-buy deal, but borrowers must be quick.”
