At the same time, the bank will roll out a 1.19% 60% LTV two-year fixed rate which has a £999 product fee.
Both products are available for purchase and remortgage customers.
For buy-to-let borrowers, the bank has added a 1.94% two-year fixed rate to its range. This is available up to 75% LTV. It comes with a £1,999 product fee and has purchase and remortgage benefits.
Skipton Building Society is currently offering a 60% LTV five year-fixed rate at 1.79% with a £1,995 fee, First Direct has a 1.84% five year fix with a fee of £1,450 and Tesco Bank is offering the same product at 1.88% with a fee of £995.
At the start of the week, it announced, from July, it would start to pay procuration fees on retention business at a rate of 0.2%.
Lea Karasavvas, managing director, Prolific Mortgage Finance, said: “Its great to see Santander starting the year so aggressively with some market-leading pricing. Its launch of a five-year fixed rate at 1.89% for residential purchase and remortgage is a very strong statement from them for the start of the year.
“This, following the announcement they will be paying on retention this year, is a true statement of intent from them and sets a high benchmark for others to follow. Such a strong message so early on should see the consumer benefiting from some excellent price wars in the coming weeks.”