- Santander is offering first-time buyers up to 98 per cent of a property’s value.
- Applicants need at least a £10,000 deposit and earnings high enough to pass strict income caps.
- Flats, new-build homes and self-employed buyers are excluded.
Santander has unveiled a mortgage that allows first-time buyers to borrow up to 98 per cent of a property’s value, a level not widely seen among major high street banks in recent years.
The lender says it is the first big name in the market to push beyond the familiar 95 per cent ceiling in some time. The move has drawn attention from brokers, some of whom reportedly described it as “bold and significant” in a news report, suggesting it could open the door to buyers who struggle to raise large deposits.
A smaller deposit, but firm limits
The deal is a five-year fixed-rate mortgage aimed solely at first-time buyers. Borrowers must put down at least £10,000, which is lower than many competing offers. The maximum loan available under the scheme is £500,000.
At first glance, that sounds like a boost for those stuck saving for years. Santander’s own data suggests 52 per cent of UK adults see the deposit as the biggest hurdle to getting on the property ladder. Last year, the average first-time buyer borrowing from the bank put down more than £85,000.
But the sums still need to stack up. Anyone hoping to borrow the full £500,000 would need to earn more than £112,000 a year. Under the 98 per cent product, Santander will lend up to 4.45 times a borrower’s salary.
By contrast, some buyers borrowing up to 95 per cent may be able to access up to 5.5 times their income from the same bank. A growing number of lenders, including Nationwide and NatWest, are allowing certain applicants to borrow up to six times their earnings.
Who misses out
There are several exclusions attached to the new mortgage. It cannot be used to buy flats or new-build homes. Properties in Northern Ireland are also ruled out. Self-employed applicants are not eligible. For joint applications, both individuals must be first-time buyers.
Those conditions could significantly narrow the pool of potential borrowers. Paula Higgins, chief executive of the HomeOwners Alliance, reportedly said in a news report that while a 98 per cent mortgage from a major lender “could make a real difference for some”, the strict eligibility criteria would limit how widely it is taken up.
She added that in parts of the south-east, where prices are higher, a £500,000 cap “may not go far”. In London, the average house price stood at £539,000 in December, according to Halifax. Flats remain a common entry point for first-time buyers in urban areas, particularly in the capital. Their exclusion, Higgins reportedly said, risks pushing ownership further out of reach for many.
The backdrop to all this is a broader push by the City regulator and the Bank of England to consider how more people might access home ownership, especially as working patterns change. In recent months, several banks and building societies have announced adjustments allowing some borrowers to access larger loans.
Santander is not entirely alone in stretching loan-to-value limits. Skipton Building Society has offered 100 per cent mortgages, while Yorkshire Building Society has introduced 99 per cent deals.
Aaron Strutt of broker Trinity Financial reportedly said Santander’s move “may well tempt other big lenders back into offering more sub-5 per cent deposit mortgages”. Whether that happens, and how far banks are willing to stretch, remains to be seen.
For first-time buyers, the headline 98 per cent figure may look promising. The fine print suggests it will suit some, but far from all.
