Santander offers 98% mortgage for first-time buyers – with strict rules

Santander, one of the UK’s largest banks, has introduced a new mortgage product allowing first-time buyers to borrow up to 98% of a property’s value. This move represents a shift beyond the traditional 95% borrowing limit, though experts caution that strict criteria will limit its accessibility.

A Step Towards Increased Homeownership?

The new mortgage requires a minimum deposit of £10,000 and has a maximum borrowing limit of £500,000. It’s a five-year, fixed-rate loan exclusively for first-time buyers. Santander stated its data indicates that 52% of UK adults identify saving for a deposit as the biggest obstacle to homeownership. Last year, the average first-time buyer borrowing from Santander put down a deposit exceeding £85,000.

Did You Know? Santander’s move marks the first time in years a major high street bank has offered a mortgage exceeding the 95% borrowing limit.

Regulatory Context and Previous Moves

This development aligns with efforts by the City regulator and the Bank of England to broaden access to the housing ladder and encourage banks to adapt to evolving lifestyles. Other lenders, including Skipton and Yorkshire building societies, have previously offered mortgages allowing borrowers to finance 100% and 99% of a property’s value, respectively. In recent months, several banks and building societies have announced increased mortgage availability for some customers.

Limitations and Restrictions

Despite the potential benefits, the Santander mortgage comes with significant restrictions. It is not available for flats, new-build homes, or properties located in Northern Ireland. Self-employed individuals are also ineligible, and joint applications require both parties to be first-time buyers.

Expert Insight: The restrictions on property type and applicant status suggest this product is designed for a very specific segment of the first-time buyer market, and its overall impact on housing accessibility remains to be seen.

The £500,000 borrowing cap may also prove problematic in higher-priced regions. For example, the average house price in London stood at £539,000 in December, according to Halifax. To qualify for the maximum loan amount, applicants must earn over £112,000 annually, as Santander’s lending limit is 4.45 times their salary.

Potential Market Impact

Aaron Strutt, at Trinity Financial, suggested Santander’s move “may well tempt other big lenders back into offering more sub-5% deposit mortgages to new customers.” However, other lenders already offer more flexible income multiples; Nationwide and NatWest now allow some borrowers to access mortgages up to six times their income, compared to 5.5 times for those borrowing up to 95% from Santander.

Frequently Asked Questions

What deposit is required for the Santander 98% mortgage?

A minimum deposit of £10,000 is required.

What is the maximum amount that can be borrowed?

The maximum loan amount is £500,000.

Are there any property types excluded from this mortgage?

Yes, the mortgage is not available on flats, new-build homes, or properties in Northern Ireland.

Will other lenders follow Santander’s lead and offer similar high-loan-to-value mortgages?

Santander offers 98% mortgage for first-time buyers – with strict rules | First-time buyers