The bank said the mortgage was designed to help aspiring homeowners get on the ladder sooner, with a fee-free product that has a rate of 5.19% and £250 cashback.
It is available exclusively to first-time buyers through a mortgage broker or Santander adviser.
Santander said it was its first step towards helping more first-time buyers, after data from the lender showed that more than half of adults in the UK said raising a deposit was the biggest barrier to homeownership.
A deposit of £10,000 is needed for the mortgage, with maximum lending up to £500,000 on terms between five and 40 years. The maximum loan-to-income (LTI) multiple is 4.5 times salary.
Santander will lend above 95% LTV and up to 98% against existing houses only, with options still available at 95% LTV for flats and new-build properties.
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David Morris, head of homes for Santander UK said: “We know that saving for a deposit remains one of the biggest hurdles to homeownership. Last year, the average first-time buyer with Santander put down a deposit of more than £85,003, a figure that can feel unattainable for today’s aspiring homeowners, whether that’s a result of more modest income, limited family financial support, rising rental costs, and in some cases, childcare expenses.
“We want to help more people benefit from the stability and sense of pride that owning a home brings, while maintaining our position as a responsible lender. My First Mortgage does just that, offering the chance to speed up the time to ownership with the reassurance that the buyer has received specialist mortgage advice and will have certainty of what they are expected to pay, every month, for the next five years.”
An important move from a larger lender
David Hollingworth, associate director at L&C Mortgages, said the product was an “important addition from a major lender, adding to the growing ranks of mortgages designed to ease the struggles of first-time buyers”.
He said there was an “increasingly healthy range of mortgages for those with little or no deposit”, adding that it would help people access homeownership sooner.
Nick Mendes, mortgage technical manager at John Charcol, noted that Santander was the first mainstream high street name to go beyond 98% LTV, adding: “That is a big psychological shift for this part of the market, because for many renters, the monthly payment has not been the issue, it has been building the deposit while rent, bills and childcare costs keep moving up.”
Last year, Newcastle Building Society launched a deal at 98% LTV for first-time buyers.
Mendes said: “It also feels like another sign the market is steadily improving, with lender appetite at the higher-LTV end widening again after a long period where options were limited.”
He added that the main consideration was the lack of headroom, as even a modest fall in property values could leave a homeowner in negative equity, which could limit future mortgage options.
Mendes said borrowers should “treat it as a longer-term plan, keep a buffer, and where possible, use overpayments to bring the LTV down towards 95% or 90% over time, which is where pricing typically gets more competitive”.
He added: “This is also where a broker adds real value. Not just in accessing the deal, but in stress testing affordability, checking the criteria, and setting a strategy for what happens at the end of the fixed rate, so the borrower is not boxed in later.”
