The first sub-4% mortgages for months are going on sale, handing a much-needed boost to first-time buyers and those worried about refinancing their home loan.

Santander on Thursday will start offering fixed rate deals at 3.99% lasting for two and five years. However, eligible borrowers need a 40% deposit, or a sizeable amount of equity to access the deals.

David Morris, head of homes at Santander, said the new products as well as rate cuts on its existing range would “make a difference to customers across every stage of the homebuying journey”.

The move follows a cut in the Bank of England base rate last week, from 4.75% to 4.5%, fuelling hopes that competition between lenders to chop mortgage rates could heat up. Lloyds Bank launched a five-year fixed remortgage deal priced at 3.98% earlier this month.

At the end of last year, post-budget expectations that UK interest rates would stay higher for longer prompted many mortgage lenders to push up the cost of their new fixed-rate deals. However, in recent weeks, fixed mortgage rates have fluctuated.

Iain Swatton, director at Exemplar Financial Services, said Santander had “fired the starting gun” on a home loans price war by becoming the first big lender in 2025 to go sub-4% on two- and five-year fixed mortgages.

He added that “we could be looking at the start of a full-scale mortgage price war. With competition heating up, other lenders will no doubt follow suit”.

Banks have recently experienced a rush in mortgage applications as some homebuyers sought to potentially save themselves thousands of pounds in stamp duty costs.

From April, stamp duty discounts will become less generous, with the “nil rate” band for first-time buyers falling from £425,000 to £300,000 and other homebuyers seeing a reduction from £250,000 to £125,000. Stamp duty applies in England and Northern Ireland.

Rachel Springall, at financial data provider Moneyfacts, said that it was “only a matter of time” before sub-4% mortgages returned as a result of money market swap rates falling in recent weeks, coupled with a cut to the bank base rate.

“The millions of mortgage borrowers looking to refinance this year need some good news, so it’s safe to say there are big expectations for more lenders to compete on price to entice new business in the coming weeks.”