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Borrowers set to cash in as mortgage war kicks off

Clear signs are emerging of greater competition opening up amongst lenders, as Santander becomes the second within days to offer a record-breaking five-year fix at 2.99% – but so far, richer borrowers are the clear winners.

Like the earlier HSBC deal, Sandander’s 2.99% fix is available only for borrowers with a 40% deposit, squeezing out those without big deposits or who do not have plenty of equity in their existing homes.

It comes with the same hefty £1,499 fee, and is available only for existing customers of the bank.  The HSBC deal is available to non-customers.

The 2.99% rate and 60% LTV maximum compares with Santander’s five-year fix at 3.89% at 70% LTV.

Elsewhere, the Government’s new £80bn ‘funding for lending’ scheme also looks to be having an effect, after the announcement prompted a drop in wholesale borrowing costs – the scheme itself does not come into effect until August 1.

Cheltenham & Gloucester, Northern Rock and Principality all cut rates last week on some deals for new customers. Principality cut up to 0.6%, while Cheltenham & Gloucester and Northern Rock made cuts of up to 0.2%.

The Royal Bank of Scotland cut its five-year fix for first-time buyers with a 10% deposit by 1.7%,  down to 4.79%, whilst Halifax has removed upfront fees on its two-year fix for customers who are remortgaging.

Santander has also launched two new intermediary deals, via Abbey for Intermediaries. One is a 2.99% three-year fix and the other a five-year fix at 3.49%, available for loans of up to £500,000.

Whilst the five-year fix is obviously higher than Santander’s direct-only 2.99% deal, it could attract those who do not fulfill the bank’s strict criteria – borrowers must already either have a Santander mortgage and be moving home, or must have had a current account with the bank for at least 30 days at the time of application.

Both products come with a £1,495 fee and with Abbey for Intermediaries’ homebuyer or remortgage solution.

Homebuyer includes a free standard mortgage valuation and £250 cashback, while the remortgage solution offers a free standard mortgage valuation, and either free legals or £250 cashback. Fees can be added to the loan and the maximum loan size on all products is £550K.

Santander’s mortgage intermediary partners include Countrywide and LSL.

source: 24th July 2012