Santander cuts mortgage rates and offers cashback

Santander’s fixed-rate deals put it near top of best buy table

Santander has cut mortgage rates and is offering cashback on repayments to customers with a 123 current account.

The bank had been scaling back on lending and had said it expected to reduce its mortgage stock, but its new range of deals puts it near the top of the best buy tables and is likely to attract borrowers through its doors.

Andrew Montlake, of mortgage broker Coreco, said Santander now offers some of the cheapest fixed rate deals over five, three and two years. Its five-year deal, available to borrowers with a deposit worth at least 40% of their home’s value, has a rate of 3.19%, beaten only by NatWest’s 3.09% five-year fix, while its two-year deal at 2.79% is also among the most competitive available. It is available up to 70% loan to value (LTV) and has an arrangement fee of £995.

Montlake said Santander was good on lending to self-employed borrowers, but had tight restrictions for those who wanted interest-only loans or had outstanding credit card debts: “There are two or three tweaks I would like to see them make to their criteria.”

The cashback offering will see the bank pay 1% on the first £1,000 of a borrower’s mortgage payment made by direct debit from their 123 current account, a benefit worth up to £120 a year, but only if they the mortgage is also with Santander. Customers who already hold both a mortgage and 123 account will see their accounts credited automatically from Monday.

The offer will be available to new customers from the same date.

The account already offers cashback on other household bills, ranging from 1% on water and council tax bills paid by direct debit, to 3% on mobile and home phone bills, plus in-credit interest of up to 3% AER. However, there is a monthly fee of £2.

A spokesman said all Santander mortgage customers would qualify for the payments, including those who have buy-to-let mortgages with the bank.

Elsewhere, Yorkshire and Clydesdale banks have launched a fee-free two-year fixed-rate deal with an interest rate of 2.99%. It is available up to 65% LTV to homebuyers and remortgagers who apply before 11 November.

Meanwhile, Halifax has said anyone looking to purchase a home through the government’s NewBuy scheme can apply for its seven-year fixed-rate mortgage. The loan, available up to 95% LTV, has an interest rate of 5.89%, but comes with no arrangement fee, and the payment of £500 cashback on completion. It is being funded through the government’s Funding for Lending Scheme, which was launched in August to stimulate the housing market.

Hilary Osborne © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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