2-year fixed mortgage rates drop below 4%

Santander has dropped its 2-year fixed mortgage rate below 4% as competition heats up amongst mortgage lenders ahead of the Bank of England (BoE) base rate decision on 19th September. Homebuyers looking to secure a sub-4% interest rate, without having to lock in for 5 years, will hope that other lenders follow suit.

2-year fixed-rate mortgages have largely remained above 4% since the now infamous mini-Budget from Liz Truss in September 2022. Following that mini-Budget mortgage interest rates spiralled upwards. While borrowers have already seen mortgages rates steadily fall as inflation has stabilised over the course of this year, many will be comforted to see 2-year fixed-rates dip back below 4%.

Santander’s new 2-year fixed mortgage rate

The fixed-rate mortgage deal launched by Santander today offers borrowers the opportunity to fix at an interest rate of 3.99% for 2 years on mortgage loans arranged on a 60% loan-to-value (LTV). This means that those who wish to take advantage of the deal will need a deposit/equity that is at least 40% of the property's value.

A homebuyer purchasing a property worth £350,000 with a £140,000 deposit can expect to pay a monthly mortgage repayment of £1,107 on the deal. The next best rates for a similar mortgage deal are offered by TSB and Halifax, offering 4.09% and 4.12% respectively where the monthly mortgage payments for a similar purchase scenario would be £1,118 and £1,122.

The best 2-year fixed mortgage interest rates on a 60% LTV have been sitting at just over 4% since the BoE voted to cut the base rate in August. So while Santander’s new deal may not present a huge cost saving on what was already available, it gives hope that the best mortgage rates could tumble further, especially if further BoE base rate cuts transpire.

Who can get Santander’s new mortgage deal?

The 3.99% 2-year fixed-rate mortgage deal is open to first-time buyers and home movers and can be arranged by existing Santander customers as well as new ones.

Borrowers looking to secure the 3.99% interest rate will be required to pay a product fee of £999 - an equivalent 2-year fixed-rate mortgage with Santander without a product fee is offered at an interest rate of 4.28%. Santander has also cut its 3-year fixed-rate mortgage deal to 3.94% on the same 60% LTV basis. Both mortgage deals come with a free valuation and can be arranged for mortgage loans between £6,000 and £3m.

Borrowers with smaller deposits can also benefit from cuts to Santander's 2-year fixed mortgage range, as it has cut its 75% LTV rate from 4.40% to 4.19% and its 85% LTV rate from 4.83% to 4.58%. The best 2-year fixed-rate mortgage deal on the market for a 75% LTV is 4.19% (offered by both Santander and TSB) while the best 85% LTV rate is 4.54%.

The new 3.99% 2-year fixed rate mortgage does not extend to mortgage holders looking to remortgage. However, Santander’s remortgage deal for a 60% LTV is still amongst the lowest in the market, at 4.20% - only beaten by TSB’s rate of 4.14% and HSBC’s at 4.19%. You can find the best mortgage rates based on your property value and deposit/equity amount by using our mortgage rate comparison tool.

How to secure the best mortgage rates

Homebuyers and movers as well as those looking to remortgage from an expiring fixed-rate mortgage deal will be keen to secure the lowest possible mortgage rate. While 5-year fixed-rate mortgage rates have been below 4% for some time, it is clear that many borrowers are reluctant to fix their mortgage for as long this, in the hope that mortgage rates will continue to fall. You can keep track of the best fixed mortgage rates in our article, "Best fixed-rate mortgage deals" which we update weekly based on varying deposit and equity amounts for home buyers, movers and remortgagers.

Getting the support and advice of a mortgage broker can help to ensure that you have explored all mortgage options (including tracker mortgages), given that some mortgage deals are not be available to customers directly. Lenders often offer mortgage deals that are only accessible through a mortgage intermediary. If you do not have a mortgage broker, you can search for one in your area using the online professional directory, Vouchedfor* where you will be able to filter mortgage brokers by area, expertise and customer reviews. You can also access over 90 lenders' mortgage deals through the online mortgage broker, Habito* - one of the first nationwide online mortgage brokers that offers virtual and telephone mortgage advice for borrowers.

If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses or take advantage of any exclusive offers - Habito, Vouchedfor