Mortgage price war ‘100% official’ say brokers – and rates could drop below 3.51% | Personal Finance | Finance

Mortgage brokers have declared a ‘price war’ as major high street lenders rush to slash interest rates.

With Barclays, Nationwide, Santander and NatWest all cutting rates in recent days, brokers now expect even sharper deals to emerge – potentially beating Santander’s current 3.51% lead as early as January. They say recent repricing is being driven by lender expectations of a 0.25% base rate reduction next week, as well as the sluggish activity seen in the months before the Budget, which likely left many lenders short of their lending targets. Nick Gatti, mortgage adviser at Wirral-based NG Mortgages, said: “The mortgage price war is 100% official. And it’s not just down to one factor but a perfect storm of two major drivers.

“First is Swap rates. Markets expect the Bank of England to cut the base rate on December 18 from 4% to 3.75%. That’s lowered funding costs for 2- and 5-year mortgages, so lenders are already pricing it in and can afford to be more competitive in what they offer consumers.

“The second factor is volume, or rather a lack of it. Data from the Bank of England shows that mortgage approvals for house purchases fell in October, remortgage approvals hit their lowest level since February, and net mortgage borrowing dropped massively, too. This all means less demand, and so lenders need to be more competitive to hit their targets.

“It’s not just rates, either. Lenders are making it easier to borrow more: HSBC is increasing income multiples to 6x for Premier clients, and other lenders are expanding income boosters to more applicants.

“So we could see deals better than Santander’s market-leading 3.51% next year and even more customers having access to them.”

Craig Fish, director at Lodestone Mortgages, agreed, adding: “Over the coming days and weeks, I suspect that we will see many more reductions from a whole host of lenders. With predictions of the base rate dropping to 3% at some point in 2026, it’s highly likely that rates will drop below 3.51% before too long.”

Ben Perks, managing director at Stourbridge-based Orchard Financial Advisers, said: “I think we’ll see a sub 3.5% rate before the year is out.

“Lenders are starting to jostle for position, and with a base rate reduction very likely, the possibility of better rates is high as the price war rages.”

Scott Taylor-Barr, principal adviser at Leicester-based Barnsdale Financial Management, says bricks and mortar being left relatively unscathed in the Budget is also playing a role.

He added: “Following the Budget and the end of the whole ‘will they, won’t they’ debate that always precedes any financial statement from the Government, the money markets have been able to better understand the next few months and better project what they feel will be the outlook for UK Plc.

“On top of that, the relatively benign Budget, with no radical moves in any direction, has given markets the context with which to view the rest of the economic data, with the end result seeming to be a general feeling that the Bank of England will be looking to further nudge down the base rate.

“This downward sentiment has then fed into Swap rates, which in turn has meant lenders have been able to reduce their fixed rate offerings.”

Michelle Lawson, director at Fareham-based Lawson Financial, added: “Christmas is finally coming for borrowers with lenders passing on rate reductions ahead of the much-anticipated base rate cut.

“With lenders struggling to meet targets and tweaking policy and rates, this should hopefully see the property and mortgage market in 2026 start with a much-needed bang”