You may have seen a lot of activity in the mortgage market of late, with lenders trying to pry customers away from their current deals with some attractive offers. In the latest quest to pull customers away from their current lenders, Santander have launched the lowest five-year fixed rate remortgage deal currently on the market with an interest rate of 1.55 per cent, which is a record low for the lender on a deal of this length. This came a day after HSBC announced a new 1.59 per cent five-year mortgage and remortgage deal, up to a maximum loan amount of £5m.

While the Santander deal comes with a fairly high fee at just under £2,000, it is available to any buyer seeking to secure 60% LTV against a property, with the HSBC deal being similar, so you will need a substantial deposit, or have some other equity. But if you do, then there are a mass of good deals out there.

In analysis, the root cause of much of the change felt in the mortgage market is due to legislation that came into force at the start of the year, and that aims to reduce risk. The requirement that large banks ringfence their domestic retail banking operations from international and investment banking has left many banks, such as Barclays, and HSBC, with huge excesses of customer deposits that can only be put to use in the UK retail market, including the mortgage business. The Bank of England has reinforced this cause in its Global Developments and Domestic Financial Conditions report, published in May 2019, that the “competition in the mortgage market” could have been “amplified” by the ring-fencing of major UK banks. This has led to a glut of funds available for mortgage purposes and has driven lenders into an unwitting price war, as they try and secure more customers, and assign the funds to something useful rather than simply languishing in their coffers. Furthermore, the market has been shocked by news that HSBC have as much as £35 billion to inject into the mortgage market, and other lenders have started to follow suit.

This race to hand out mortgage deals is also fueling a rise in incentives to customers to tempt them, with smaller lenders such as West Bromwich building society is offering up to £1,500 cashback on some of its deals, and a number of other lenders are offering up to £1,000 to switch to a new deal. Financial data provider Moneyfacts recently released a report that showed that the number of new home loan deals that offer incentives such as cashback, a free valuation or free legal fees has risen sharply of late. In May 2017, there were 920 mortgages that came with cashback payments, while this month the number stood at 1,518.

If you are looking to secure a new deal on your property, or are a first time buyer, why not talk to us at Grange Mortgages and see how we can help you.