Santander has introduced a new mortgage allowing first-time buyers to borrow up to 98% of a property’s value, breaking the long-standing 95% deposit barrier set by most major lenders. While the move is seen as a boost for aspiring homeowners, strict eligibility rules are expected to limit who can benefit.
The five-year fixed-rate mortgage is available only to first-time buyers and requires a minimum deposit of £10,000. Borrowers can take out loans of up to £500,000, with lending capped at 4.45 times annual income.
However, the mortgage excludes several property types and buyer groups. It is not available for flats, new-build homes, or properties in Northern Ireland. Self-employed applicants are also excluded, and joint applications are only allowed if both applicants are first-time buyers.
The income cap creates another hurdle, particularly in high-cost areas. To borrow the maximum £500,000, applicants would need an annual income of more than £112,000, making the product less accessible in regions such as London, where average house prices exceed the loan limit.
Santander said its research shows saving for a deposit remains the biggest obstacle to home ownership for many people, with typical first-time buyer deposits far higher than the minimum required for this product.
Housing experts welcomed the higher loan-to-value offering but warned that the restrictions could significantly reduce its impact. The exclusion of flats, often the primary entry point for buyers in major cities, was highlighted as a particular concern.
Despite the limitations, brokers believe the move could encourage other large lenders to re-enter the high loan-to-value mortgage market, potentially increasing options for first-time buyers struggling to save large deposits.
