Mortgage price wars as two major lenders slash rates in boost to homeowners and first time buyers

Two of the biggest lenders have cut rates in a move which could lead to a new mortgage war between the biggest banks and building societies.

Nationwide announced a raft of changes last week which included up to 0.16 percentage points being slashed off existing products - with the lowest rate on a two-year deal now down to 3.54 per cent.

Santander has followed suit with reduced rates on first-time buyer deals across two, three and five-year fixes - some by as much as 0.32 per cent.

While the headline rate isn’t the only part of a mortgage deal which matters to homeowners or buyers alike, the increased competition between the biggest names on the high street is a good thing for consumers.

Up to 1.8m people are expected to renew their existing mortgage deal across 2026, with interest rates still on a downward path - likely good news for any of those whose deal started from 2023 onwards.

Last year, it was notable that when a couple of lenders started to drop rates on their products, others quickly followed in an attempt to get a share of the market.

With property sales stuttering last year, there was renewed emphasis on getting clients onboard, leading to a battle for those renewing rather than buying. While there’s no guarantee the same will happen this time around, it feeds into a wider positive feeling around the market for those seeking deals in 2026.

In particular, Santander is clearly making a big push at the first time buyer market.

It recently launched a scheme for those buying with just a 2 per cent deposit, a five-year fix with no initial fee, while the latest cuts focus on FTBs as well and see rates now start from 3.92 per cent.

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David Morris, director of homes at Santander UK, said: “We’re going into 2026 with a renewed focus on supporting first-time buyers in a balanced and responsible way, with recent applications for our newly launched My First Mortgage showing there is real demand in the market for creative support from lenders.”

That’s a different part of the wider market to where Nationwide’s cuts will focus, says one industry expert - who served a reminder to look beyond the headline rate at the overall repayment package.

“Nationwide and Santander’s reductions matter because they target parts of the market where pricing has been most sensitive,” explained Craig Leigh, mortgage adviser at The Mortgage Broker to The Independent.

“Santander is cutting higher loan-to-value fixed rates for first-time buyers by up to 0.32%, which is relevant for people buying with smaller deposits. Nationwide has cut across first-time buyer, home mover, remortgage and switcher ranges. For consumers, the benefit is simple: lower fixed rates can reduce the cost of borrowing, but you still need to compare the total cost once fees and early repayment charges are included.

“The smart play for consumers is to judge every mortgage on the total cost, not the headline rate, because fees, incentives and early repayment charges can change the outcome.”

As for what comes next, experts usually urge those who will need a deal to act fast - the best rates on the market can disappear fast and only a few short weeks ago, four or five lenders raised their rates.

“Nationwide and Santander cutting rates in quick succession is a reminder that this market is being driven by funding costs and competition, and borrowers can benefit when large lenders move,” Mr Leigh added.

“If you have got a decent deposit, or you’ve paid down a good chunk of your mortgage, lenders usually offer lower rates. That’s why deals like Nationwide’s 3.54% two-year fix (aimed at borrowers with around a 40 per cent deposit or equity) stand out. If you’re buying with a smaller deposit, rates are typically higher, so Santander’s fee-free 95% mortgage at 4.72% is notable because it’s designed to support buyers with only a 5 per cent deposit.

“As always, the exact deal you can get depends on your circumstances and lender criteria, and rates can change quickly, but these are positive signs.”