Santander and TSB kick off mortgage rate cuts after Iran turmoil
Santander and TSB have kicked off the mortgage rate cutting cycle after lenders pulled deals and hiked their rates amidst the turmoil in Iran.
From Thursday, Santander said it would be lower the price on higher loan-to-value (LTV) mortgages products by near 0.3 per cent, which includes its two-year fixed, first-time buyer products.
Meanwhile, TSB said it would slash its two-year fixed rates by up to 0.45 per cent, though this did come as it also announced some products would rise in price.
The changes mark the first price cuts from mortgage lenders after weeks of hikes that have led to average rates spiking by over one per cent.
Last week, fresh figures revealed the average mortgage was on the market for just eight days in March – the lowest since records began in November 2011.
This marked a staggering drop from 14 days in February ahead of the conflict breaking out and massively undercuts the previous record of 12 days in July 2023.
Volatility in prices has been driven by a re-pricing in swap rates, which serve as a primary benchmark for pricing fixed-rate mortgages and reflect market expectations for future interest rates over 2, 5, or 10-year terms.
Mortgage mayhem as Bank of England interest rate cycle derailed
The Bank of England was tipped to cut interest rates in the March meeting with markets pricing in chances of a reduction at 80 per cent ahead of the war in Iran breaking out at the end of February.
Since then, hopes of a rate cut have cooled for the year. The Bank declared a hawkish hold in March with a unanimous decision amid fears of a jump in inflation.
At the height of the conflict, the average five-year fixed deal for a homeowner spiked to 5.54 per cent, up from 4.95 per cent at the start of March, according to financial information platform Moneyfacts.
The level marks the highest for the five-year fix since September 2024.
Adam French, head of consumer finance at Moneyfacts, told Morning Wire at the end of March that hopes that affordability was “back on track” to 2021 levels had “collapsed” in the wake of the war in Iran.