- Withdrawn deals include Santander’s market leading 3.68% five-year fix
Santander has temporarily withdrawn a number of its mortgage deals in a further sign that home loan prices may start rising again.
From 10pm tonight the bank says it’s withdrawing eight fixed rate deals, including its market leading 3.68 per cent five-year fix.
It says it will be relaunching these deals from next Tuesday. However, one mortgage expert suspects the relaunch will come with higher rates.
Nicholas Mendes, mortgage technical manager at broker John Charcol, said: ‘I suspect this ‘temporary withdrawal’ means the lender will pause, review, and re-launch at a higher rate.’
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Smokescreen? Santander says it’s temporarily withdrawing some fixed rates at 10pm tonight and will relaunch next Tuesday. But one mortgage expert suspects this will be with higher rates
If correct, this means that Santander’s 3.68 per cent five-year fix will cease to exist from tonight.
This was available to home movers and first-time buyers with deposits of at least 40 per cent.
This will leave Barclays as the lowest five-year fixed deal on the market at 3.71 per cent.
Alongside the temporary withdrawal of its market leading deal. Santander is also withdrawing its 3.92 per cent five-year fix for those buying with a 25 per cent deposit.
Those buying with a 15 per cent deposit will also lose access to its 4.15 per cent five-year fix.
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Why is Santander temporarily withdrawing deals?
Mortgage lenders price their fixed mortgage rates, according to sonia swap rates, funding targets, demand from borrowers and general economic sentiment.
Sonia swaps are the easiest way to interpret where fixed rates may be heading.
Put most simply, sonia swap rates essentially show what lenders think the future holds concerning interest rates.
When sonia swaps rise sufficiently it often results in fixed mortgage rates going up and vice versa when they fall.
In recent weeks sonia swaps have been ticking upwards again. As of 9 October, two year swaps were at 4.05 per cent and five-year swaps were at 3.79 per cent.
That marks a rise compared to 20 September when two-year swaps were at 3.82 per cent and five-year swaps were at 3.52 per cent.
Expert: Nicholas Mendes, mortgage technical manager at broker John Charcol, suspects this ‘temporary withdrawal’ means Santander will re-launch at a higher rate
Mendes thinks a significant factor behind Santander’s product withdrawals could well be down to profit margins and pricing.
‘Lenders set mortgage rates based on market factors such as swap rates, which influence the cost of funding for fixed-rate mortgages, and competitor offerings,’ said Mendes.
‘Typically, lenders price mortgage rates a fortnight in advance. If market conditions shift during that period—for example, if swap rates rise—a previously profitable product may no longer make financial sense.
‘In such cases, the lender may withdraw the product to avoid offering a mortgage that could lead to financial losses.
‘After reassessing the market, they are likely to reprice the product upon re-entry, often with a higher interest rate or altered terms to restore profitability.
However, Mendes also says the decision by Santander could be due to service levels and high demand from borrowers.
‘If a mortgage product is too competitive in the market, meaning the lender’s offering is more attractive than others, this can lead to a surge in applications,’ added Mendes.
‘Although high demand seems positive, it can strain the lender’s ability to process applications efficiently.
‘To maintain good service levels and ensure applications are handled in a timely manner, the lender may need to temporarily withdraw the product to manage their workload.
‘Once they catch up, they may reintroduce the product, potentially at the same rate or with adjusted terms.’
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