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Is the 0.99% Mortgage Really as Good as it Sounds?

16 February 2017

  • Santander have re-introduced the 0.99% fixed rate mortgage

  • The new rate is currently the lowest available on the mortgage market (Financial Adviser)

  • It has caused other lenders to introduce their own incentives to compete 

In December last year, HSBC withdrew their astonishingly low fixed rate mortgage of 0.99% to match the rising rates of other lenders. At the time, it was one of the lowest-ever loan rates. (The Telegraph) Since HSBC revoked their industry-leading mortgage, Yorkshire Building Society then became the next lender to offer the lowest loan rate on the market with a fixed rate mortgage at 1.16%. (London & Country).

However as of this month, Santander have re-launched the 0.99% fixed rate mortgage. The loan is based on an 18-month term & at 60% loan to value meaning that buyers would need a 40% deposit (Mortgage Strategy). At this new rate, buyers would potentially only have to pay £565 a month on their mortgage if they were to borrow £150,000 over 25 years (Daily Mail).

Although this may seem like a way onto the property ladder for many potential buyers, with high loan to value mortgages generally comes higher rates & higher fees. Santander have stated that in order to receive their new loan, a product fee of £1499 must be paid. Also whilst the new rate allows potential buyers to pay less initially, after 18 months the 0.99% rate would then switch to the lenders standard variable rate which is currently 4.49%. This means that the low monthly payments borrowers paid within the first 18-months, will rapidly increase after the term is over. 

The (Daily Mail) also believe that an 18-month term is likely to be too short for many buyers as it does not offer as much protection as longer terms would against any movement in the Bank of England interest rates. For instance if you were to take out the 0.99% rate with Santander, once your 18 months is up, you would have to get a new rate again & by this point they may have risen significantly. Therefore it is believed that longer terms with slightly higher rates provide buyers with more security in the event of a change in the Bank of England rates.

It seems that other lenders have taken note of Santander's attempt to gain more business by introducing other incentives of their own to compete. According to David Hollingworth, associate director at London & Country mortgages, other lenders are attempting to draw attention to themselves by offering incentives such as cashback (Your Money).

As a result, it is hard to tell which lender is best for you & your situation which is why it is best to visit a qualified mortgage adviser who can guide you in the right direction. Visit for more information. 

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