Santander has introduced a mortgage product allowing first-time buyers to borrow up to 98% of a property’s value, marking the first time in years that a major high street bank has exceeded the traditional 95% lending threshold. However, the product comes with multiple restrictions that may limit its accessibility.
The five-year fixed-rate mortgage requires a minimum deposit of £10,000 and caps borrowing at £500,000. The product is restricted to first-time buyers only, with both applicants required to meet this criterion for joint applications.
Eligibility restrictions
The mortgage excludes several property types and buyer categories. Flats and new-build properties are not eligible, nor are properties located in Northern Ireland. Self-employed individuals cannot access the product, and the maximum loan is limited to 4.45 times the borrower’s salary.
To borrow the maximum £500,000, applicants would need to earn more than £112,000 annually. By comparison, first-time buyers borrowing up to 95% from Santander may access up to 5.5 times their salary, whilst other lenders including Nationwide and NatWest now offer up to six times income for some borrowers.
Market context
Santander is not the first lender to exceed 95% loan-to-value ratios. Skipton and Yorkshire building societies have previously offered 100% and 99% mortgages respectively. The City regulator and the Bank of England have been examining ways to increase housing ladder accessibility, with several banks and building societies announcing higher income multiples in recent months.
Paula Higgins, chief executive of the HomeOwners Alliance, noted that the eligibility criteria would limit adoption. “These restrictions raise real questions about how many first-time buyers can realistically benefit, particularly in higher-priced parts of the south-east where £500,000 may not go far,” she said.
The exclusion of flats presents particular challenges in urban areas. In London, where the average house price stood at £539,000 in December according to Halifax data, the £500,000 cap and flat exclusion significantly reduce the product’s applicability.
Santander’s data indicated that 52% of UK adults identified saving for a deposit as the primary barrier to property purchase. Last year, the average first-time buyer borrowing from the bank deposited more than £85,000.
Industry response
Aaron Strutt at Trinity Financial suggested the move “may well tempt other big lenders back into offering more sub-5% deposit mortgages to new customers.”
The product’s introduction reflects broader market trends towards higher loan-to-value ratios and income multiples, though the specific restrictions may limit its impact on the first-time buyer market, particularly in high-value regions and urban centres where flats dominate entry-level housing stock.
