Good news for UK homebuyers and those looking to remortgage – mortgage rates are finally heading in the right direction. Santander has just dropped its fixed-rate mortgages below 4% for the first time in months, and experts believe this could be the start of a full-scale mortgage price war.

For anyone struggling with high borrowing costs, this could mean thousands of pounds saved over the lifetime of a mortgage. But is now the right time to fix, and will other banks follow Santander’s lead? Let’s take a closer look.

What’s Changed? Santander’s Game-Changing Move

Santander has launched two- and five-year fixed-rate mortgage deals at 3.99% – the first time we’ve seen sub-4% rates in a long while. But there’s a catch.

• To qualify, you’ll need a 40% deposit or equivalent equity in your home.
• The new rates are available from Thursday and apply to both first-time buyers and those remortgaging.
• Alongside these, Santander is cutting rates across its entire mortgage range.

David Morris, head of homes at Santander, says these new deals will “make a difference” for buyers at every stage of the homebuying process. And with borrowing costs having been painfully high for much of the past year, this is welcome news.

Why Are Mortgage Rates Falling?

This move follows a cut in the Bank of England base rate, which recently dropped from 4.75% to 4.5%. While this isn’t a huge fall, it’s a signal to lenders that rates could ease further in 2025.

The financial markets had previously expected interest rates to stay high, which pushed up mortgage costs. But now, with money market swap rates (the rates banks use to price mortgages) falling, lenders have room to slash their own mortgage rates.

Are We About to See a Mortgage Price War?

Lloyds Bank has already launched a five-year fixed remortgage deal at 3.98%, and other big lenders will be under pressure to stay competitive. The more banks that drop their rates, the better it is for borrowers.

Is Now the Time to Fix Your Mortgage?

If you’re coming to the end of a fixed-rate deal or looking to buy your first home, you might be wondering if now is the time to lock in a deal – or if rates could fall even further.

Here’s what to consider:

✔ If you need certainty – A fixed-rate deal at 3.99% is significantly cheaper than what was available just months ago. If you can’t afford the risk of rates rising, locking in now makes sense.

✔ If you have a large deposit – The best deals (like Santander’s) require a 40% deposit or equity. If you don’t have this, you may need to wait for more lenders to drop rates across lower deposit mortgages.

✔ If you’re remortgaging soon – Rates have fluctuated over the past year. If you’re coming off a much higher fixed-rate deal, moving to a sub-4% rate now could save you thousands.

However, if you think rates will fall even further this year, you might want to hold off fixing and explore short-term tracker mortgages instead.

Stamp Duty Changes – Another Reason to Act Fast?

Another factor pushing homebuyers to act now is the looming stamp duty shake-up in April.

• The tax-free threshold for first-time buyers will drop from £425,000 to £300,000.
• For other buyers, the nil-rate band will be cut from £250,000 to £125,000.

This means that if you buy after April, you could end up paying thousands more in stamp duty. With lower mortgage rates now available, some buyers may decide now is the time to act.

Final Thought – Should You Make a Move?

With Santander leading the charge, a mortgage price war could be about to kick off. That’s fantastic news for anyone looking to buy or remortgage in 2025.

But the best deals still require a big deposit, and there’s no guarantee that rates won’t fall further later in the year.

If you’re unsure, speaking to Questa is a smart move. They can help you weigh up your options and find the best deal for your situation.

One thing’s for sure – after a tough couple of years for borrowers, things are finally looking a little brighter.