A major high street lender has launched a new mortgage aimed at helping first-time buyers onto the property ladder with deposits as low as two per cent.
Santander UK’s new product, called “My First Mortgage”, allows borrowing of up to 98 per cent loan-to-value (LTV), though a minimum cash deposit of £10,000 still applies. That means only buyers purchasing a property worth up to £500,000 could access the full two per cent option.
The mortgage comes with a fixed interest rate of 5.19 per cent for five years and carries no product fee. Borrowers can take loans of between £190,001 and £500,000, over terms ranging from five to 40 years. Santander also offers £250 cashback on completion.
However, the deal has limits. It is only available to employed applicants living in Britain, with self-employed buyers and those in Northern Ireland excluded. Lending above 95 per cent LTV, up to the 98 per cent maximum, applies only to existing homes. Buyers of new-build properties can borrow up to 95 per cent LTV.
All applications are still subject to Santander’s affordability rules, including a maximum loan-to-income ratio of 4.45 times a borrower’s salary.
David Morris, Santander UK’s head of homes, said saving for a deposit remains one of the biggest barriers to homeownership. He noted that the average first-time buyer with Santander last year put down more than £85,000, which can feel unrealistic for many aspiring owners facing modest incomes, high rents, limited family support and, in some cases, childcare costs.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said first-time buyers should seek advice before applying. She pointed out that some lenders, such as Nationwide, can offer enhanced loan-to-income ratios of up to six times salary.
She added that building societies are increasingly supporting new buyers with innovative products, including Skipton’s Track Record Mortgage, Nationwide’s Helping Hand, and Hanley’s Rent to Own mortgage.
Ms Springall said innovation is likely to be a major focus this year, with the Financial Conduct Authority reviewing ways to expand options for first-time buyers. She added that while the Government wants lenders to do more to support growth, progress is also needed to tackle the shortage of affordable housing.
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