The cheapest two-year fixed rate mortgages headed closer to 4 per cent today as a major lender announced several new market-leading deals.
Santander has cut its lowest two-year fixed rate deal from 4.55 per cent to 4.1 per cent, which is a new best buy.
The deal, which comes with a £999 product fee, is available to home buyers with at least a 40 per cent deposit.
Santander’s latest move means that in just over two weeks the lowest two-year fixed rate deal on the market has fallen from 4.6 per cent to 4.1 per cent.
Best buy: Santander has slashed a number of its fixed rate mortgage deals today and is now offering the cheapest two-year fix on the market
The average two-year fix for buyers with the biggest deposits is currently 5.09 per cent, according to Moneyfacts.
That would mean someone repaying a £200,000 mortgage over 25 years would pay £1,180 per month.
With Santander’s 4.1 per cent deal, someone with those same circumstances would pay 1,067 per month, which is £113 less per month than the average.
Five-year fixes are currently cheaper than two-year deals, with the cheapest at around 3.92 per cent.
> What next for mortgage rates, and how long should you fix for?
Recent data from L&C Mortgages showed that two-year fixed rate deals have become the most popular in recent months, despite being more expensive.
It showed that more than half of home buyers opted to fix for two years in December.
This is despite five-year fixed rates being cheaper at present and being the product of choice in the past.
Many of those fixing for two years will have done so, in the hope that mortgage rates will be lower when they come to refinance.
Santander’s new market-leading rate could therefore likely prove very popular among buyers.
The good news is that those with smaller deposits also stand to benefit from Santander’s latest rate cuts.
Those buying with a 25 per cent deposit can now secure a 4.15 per cent rate with Santander, the next lowest rate on the market.
Someone buying with a 15 per cent deposit can now also secure 4.52 per cent with Santander, which is also a best buy for that category.
Santander has also cut a number of its five-year fixed rate deals. Most notably buyers with a 15 per cent deposit can secure a 5.24 per cent rate with Santander now – which is again a market leading deal.
