Santander has become one of the first major UK banks to offer a mortgage allowing first-time buyers to borrow up to 98% of a property's value, requiring a deposit of at least £10,000. The five-year fixed-rate deal is capped at £500,000 and carries a maximum loan-to-income ratio of 4.45 times salary.
However, the product comes with significant restrictions. It is not available on flats, new-build homes, or properties in Northern Ireland. Self-employed buyers are excluded, and joint applicants must both be first-time buyers. Brokers have described the eligibility criteria as “very strict”, potentially limiting the number of people who can benefit.
Santander said the move is aimed at addressing the biggest barrier to home ownership: saving a deposit. Data from the bank shows 52% of UK adults cite deposit saving as their main obstacle. Last year, the average first-time buyer who borrowed from Santander put down a deposit of more than £85,000.
Paula Higgins, chief executive of the HomeOwners Alliance, welcomed the initiative but warned that the exclusions, particularly on flats, could undermine its effectiveness in urban areas like London, where average house prices exceed £500,000. “Flats are the main route into home ownership in cities,” she said.
Mortgage broker Aaron Strutt of Trinity Financial said the product may encourage other lenders to offer sub-5% deposit mortgages. He noted that those seeking the maximum £500,000 loan would need an annual income of over £112,000, limiting its appeal compared to lenders offering higher income multiples.
