Santander’s decision to launch a 98% loan-to-value mortgage has quickly become one of the most talked‑about developments in the UK housing market.
As someone who closely follows first-time buyer trends, I can see why this announcement matters. For many aspiring homeowners, saving a large deposit has become the single biggest obstacle to getting on the property ladder.
This new product, known as Santander’s My First Mortgage, directly addresses that challenge by allowing buyers to purchase a home with just a 2% deposit, potentially shaving years off the saving process.
However, it also comes with strict eligibility rules and long-term considerations that should not be overlooked.
Key points first-time buyers should understand:
- It is a 98% LTV mortgage exclusively for first-time buyers
- A minimum £10,000 deposit is required
- The mortgage is a five-year fixed deal at 5.19%
- Strict affordability and property-type rules apply
Understanding how this mortgage works, who it suits, and where the risks lie is essential before making any decision.
What is Santander’s 98% ‘My First Mortgage’ and how does it work?
Santander’s 98% mortgage allows first-time buyers to borrow up to 98% of a property’s value, meaning the buyer only needs to contribute a 2% deposit. This is a significant shift from the traditional 95% ceiling offered by most major banks since the financial crisis.
The product is offered as a five-year fixed-rate mortgage, giving borrowers payment certainty during the early and often most financially stretched years of homeownership. The fixed rate currently stands at 5.19%, with no product fee and £250 cashback on completion, which slightly reduces upfront costs.
To qualify, buyers must provide a minimum deposit of £10,000, regardless of property value, and borrowing is capped at £500,000. Mortgage terms range from five to 40 years, allowing some flexibility in managing monthly repayments.
Santander positions this mortgage as a bridge between saving struggles and sustainable lending.
As David Morris, Head of Homes at Santander UK, explained:
“We know that saving for a deposit remains one of the biggest hurdles to homeownership. My First Mortgage offers the chance to speed up the time to ownership while maintaining our position as a responsible lender.”
This balance between accessibility and caution defines how the product works in practice.
Who Qualifies for the Santander 98% Mortgage in 2026?
Eligibility is where Santander’s 98% mortgage becomes far more selective than it may initially appear. While the low deposit grabs attention, the criteria ensure that only certain buyers can proceed.
Core Eligibility Requirements
To qualify, applicants must meet the following:
- Be first-time buyers only – this product is not for those who have previously owned a property.
- Be in employed status – self-employed applicants are excluded, likely due to income variability concerns.
- Borrow within a limit of 4.45 times their household income – regardless of deposit size.
- Keep their maximum loan amount below £500,000 – this rule ensures affordability is kept in check.
These requirements immediately narrow the field to buyers with stable incomes, modest property ambitions, and no ownership history.
Property and Location Restrictions
Santander limits lending at the 98% tier to:
- Existing houses only – flats and new-builds are excluded, due to higher perceived risk of depreciation or negative equity.
- Excludes properties in Northern Ireland – only properties within England, Wales, and Scotland are eligible.
This means buyers looking at flats in city centres or those considering new developments will need to seek alternative mortgage products at 95% LTV or below.
Joint Applications
If applying jointly, both applicants must be first-time buyers, which may exclude couples where one partner already owns or previously owned a property.
Santander’s restrictions reflect concerns around property volatility and affordability risk. While this limits the number of eligible buyers, it also explains why the bank is willing to offer lending at such a high loan-to-value ratio.
Why is Santander Targeting First-time Buyers With Low Deposits?
The launch of the Santander 98% mortgage is not happening in isolation. It reflects a broader shift in the UK housing and mortgage markets, driven by structural affordability issues rather than short-term demand.
Santander’s internal data shows that 52% of UK adults cite saving for a deposit as the biggest barrier to buying a home. In 2025, the average first-time buyer deposit exceeded £85,000, a figure that feels unattainable for many renters facing high housing costs and stagnant wage growth.
As David Morris noted:
“We know there’s a generational problem. Millions of customers are getting locked out of homeownership, and this is one way to address that.”
By lowering the deposit threshold, Santander aims to reduce the time it takes to save for a deposit by several years, particularly for younger buyers and those without family financial support.
The bank is also responding to regulatory encouragement, as policymakers and regulators have pushed lenders to explore responsible ways to support first-time buyers.
How Does the Santander 98% Mortgage Compare to Other Low-deposit Options?
Santander’s entry into the ultra-high LTV space is part of a growing trend, but it differs significantly from what building societies and alternative lenders are offering. A comparison helps clarify its strengths and weaknesses.
Comparison of Low-Deposit Mortgage Options:
| Lender | Max LTV | Minimum Deposit | Fixed Rate | Key Restrictions |
| Santander | 98% | £10,000 | 5.19% (5-year) | Houses only, 4.45x income cap |
| Skipton BS | 100% | £0 | ~5.79% | Rental history needed, higher rate |
| Nationwide | 95% | 5% | ~4.5% | Requires larger deposit |
| Barclays | 100% | Family-backed | Variable | Linked savings required from family |
While Santander offers a lower interest rate than most 100% LTV deals, its property restrictions and income cap make it less flexible. It’s a safer option for risk-aware buyers, but not as inclusive as Skipton’s or Barclays’ alternatives for those without a deposit.
The main benefit is its availability through a well-established lender, with access to in-branch support, broker advice, and more competitive fixed-rate terms.
What Are the Financial Risks of a 98% Mortgage for First-time Buyers?
While the headline benefit is clear, the risks associated with a 98% mortgage deserve careful consideration. High loan-to-value borrowing magnifies both opportunity and exposure.
The most significant concern is negative equity, where the mortgage balance exceeds the property’s market value. Even a modest fall in house prices could leave borrowers unable to remortgage or move without injecting extra funds.
Monthly repayments are also higher than on lower LTV mortgages, increasing pressure on household budgets. Over the full mortgage term, even a small interest rate premium can add tens of thousands of pounds to total repayment costs.
George Abouzolof, Senior Mortgage Adviser at Clifton Private Finance, warned:
“Ultra-low deposit mortgages can turn the dream of homeownership into an expensive gamble if buyers are not financially prepared.”
This does not mean the mortgage is unsuitable, but it does mean buyers should approach it with long-term planning rather than short-term urgency.
Can You Afford Santander’s 98% Mortgage on My Income?
Affordability is a critical factor when applying for Santander’s 98% mortgage. The bank conducts a detailed assessment based on a maximum income multiple of 4.45x your gross household income.
This means your combined income will directly influence the amount you’re eligible to borrow, and in turn, the types of properties you can consider.
How Income Limits Affect Borrowing?
For example, if you’re earning £40,000 per year, you may be able to borrow up to approximately £178,000. A couple with a joint income of £70,000 could be eligible for a mortgage of around £311,500. However, these figures are theoretical and depend on other affordability factors such as existing debts, credit score, and monthly outgoings.
This cap can pose challenges in high-cost areas, particularly London and parts of the South East, where average property prices often exceed £500,000, far beyond what most first-time buyers can afford on standard salaries.
Income vs Maximum Borrowing
| Household Income | Max Loan (4.45x) | Approx Property Price |
| £35,000 | £155,750 | £159,000 |
| £50,000 | £222,500 | £227,000 |
| £75,000 | £333,750 | £340,000 |
To understand what you can truly afford, it’s important to use online mortgage calculators and speak to a qualified mortgage adviser. They’ll help assess affordability based not only on income but also on your lifestyle, financial commitments, and long-term goals.
What Steps Should You Take Before Applying for This Mortgage?
If you’re considering applying for the Santander 98% mortgage, preparing thoroughly is key. High LTV products are scrutinised closely, and any gaps in eligibility or documentation can cause delays or rejections.
Start by:
- Reviewing your credit score – Clear any old debts or missed payments
- Reducing your existing financial obligations – Credit card debt or loans can hurt affordability assessments
- Ensuring stable employment and income history – Santander prefers applicants with consistent salaries
- Gathering key documents – Proof of income, bank statements, ID, and deposit source
- Consulting a mortgage adviser – Santander only accepts applications via approved advisers or brokers
Planning ahead not only increases your chance of approval but also helps identify potential alternatives better suited to your circumstances.
Is It Better to Wait and Save More or Buy Now With Santander’s Deal?
This question has no universal answer, and the right choice depends heavily on personal circumstances. Buying now may offer stability and protection from rising rents, while waiting could result in access to cheaper mortgage rates and greater flexibility.
Real-life example:
Consider a couple renting in Manchester, earning a combined £60,000 and saving £600 per month. Waiting four more years could allow them to reach a 10% deposit, but they would spend nearly £50,000 on rent during that time. For some, Santander’s mortgage may offer a faster and emotionally valuable route to ownership, even if it costs more in interest.
Alternatively, with Santander’s 98% mortgage, they could buy now, start building equity immediately, and potentially gain from future house price appreciation even if their interest rate is slightly higher.
“The fact you have to take on a five-year fix is very sensible because after five years of payments, you have a little less risk of going into negative equity.”
– Andrew Montlake, Managing Director, Coreco
If you’re in a rising market with stable employment, buying sooner may make financial sense. But if your job is insecure, or you’re likely to move within a few years, waiting might offer more flexibility and lower risk.
How Can You Make the Most of the Santander 98% Mortgage Over Time?
Securing the mortgage is just the beginning; your financial strategy going forward will determine how much long-term value you get from it. Since you’re starting with very little equity, it’s important to build financial resilience and reduce your loan-to-value (LTV) ratio gradually.
Practical strategies:
- Make regular overpayments – Santander permits up to 10% of the mortgage balance in overpayments annually without penalty. This reduces the principal faster and lowers your interest over time.
- Build an emergency fund – Saving 3–6 months’ worth of living expenses gives you a cushion in case of job loss or illness.
- Track local house price trends – Knowing your home’s current market value helps you plan ahead for remortgaging.
- Set a refinancing strategy – As your equity grows, plan to move to a mortgage with a lower LTV (e.g., 95% or 90%) after the five-year fixed term to secure better rates.
The earlier you reduce your LTV, the more options you’ll have when it comes time to refinance, move, or renegotiate your mortgage terms.
Conclusion
Santander’s 98% mortgage represents a bold and significant shift in UK mortgage lending. It offers a genuine opportunity for some first-time buyers to overcome the deposit barrier and achieve homeownership sooner than expected. However, it is not a universal solution.
If I were considering this mortgage myself, I would weigh the benefits of early ownership against the risks of high leverage and limited flexibility.
With careful planning, realistic expectations, and professional advice, the Santander 98% mortgage can be a valuable tool, but only for those who fully understand its long-term implications.
FAQs
Can I use a Lifetime ISA as part of my deposit?
Yes, Santander allows Lifetime ISA funds to contribute to the deposit, provided all withdrawal rules are met.
What happens after the five-year fixed period ends?
Borrowers can remortgage, move onto a standard variable rate, or switch lenders, subject to affordability and LTV.
Does Santander allow gifted deposits?
Yes, gifted deposits from close family members are accepted, subject to documentation.
Can I overpay without penalty?
Santander typically allows up to 10% overpayments per year without early repayment charges.
Will this mortgage affect my ability to get other credit?
High LTV borrowing may reduce short-term credit availability due to higher debt commitments.
Is mortgage protection insurance required?
It is not mandatory but is strongly recommended given the financial exposure.
What alternatives exist if I don’t qualify?
Options include 95% mortgages, family-assisted schemes, and rental history-based products.
