Santander cuts its fixed rates today by up to 0.40 per cent

Responding to a general increase in mortgage market competitiveness, Santander has trimmed the rates on its five-year fixed rate mortgages by up to 0.25 per cent. The range includes a 4.99% deal for purhases only (70 per cent LTV limit, £995 fee), or 5.15 per cent for remortgage customers (75 per cent LTV limit, £995 fee).

Santander tracker mortgages also get trimmed by up to 0.40. We supsect the Spanish megabank might have further cuts up its sleeve, but for now these deals represent a good show for borrowers looking for medium-range rate stability on purchase mortgages.

Spanish rebrand of Abbey and Bradford & Bingley branches ushers in new phase of mortgage competition

One of the first things Santander has done on introducing its name to the UK High Street is to introduce competitive two-year fixed rate mortgage deals.

As the first of 1,000 Abbey and Bradford & Bingley branch shopfronts puts up the new Santander sign, mortgage borrowers with 90 per cent loan to value will be able to walk in and request a two-year tracker with a £995 fee that charges only 4.99%.  

That's around 0.2% cheaper than the nearest competitors for that type of mortgage.

Meanwhile, Santander's 2-year fixed rate for borrowers with 75 per cent loan to value stands at 4.39%.  This is slightly more than the market average of 2-year fixed rates for those type of borrowers, which has recently fallen to 4.06%.  However, the Santander deal has no arrangement fee, making it a winner for some borrowers — particularly those with lower mortgage balances.

The might of the Spanish banking group has been focused on one thing: efficiency. From the outset, this certainly seems to be driving competitiveness. Will the government-supported big UK bank conglomerates be able to achieve enough similar efficiencies to compete?

Bradford & Bingley has admitted huge losses caused by bad debts.

Its savings and deposits business has been sold and now sits under the Santander umbrella, leaving the nationalised B&B with only its mortgage and loan book.  And what a bad one it is...

Out of £40.3bn out on loan, the bad debt total now stands at £328.4m. That means it has quadrupled in a year.  The culprit? Mortgage arrears.

This is probably a symptom of B&B's over-keen lending during the boom, combined with its none-too-smart acquisition of a tranche of adverse credit mortgages from Kensington and GMAC just in time for the credit crunch.

We also wonder whether there could be a touch of carelessness from lenders still stuck with B&B, hoping to break free one way or another and allowing their loans to fall into arrears.  I'm not sure I'd want my credit rating affected by doing that, but then if you have poor credit in the first place, where's the loss?  Just a thought...