Saving for a deposit is the hardest part of buying your first home. And Santander has just made it a bit easier.
The bank has launched a new mortgage called “My First Mortgage” that lets first-time buyers borrow up to 98% of a property’s value.
That means you only need a 2% deposit.
It’s the first time a major high street lender has gone beyond the usual 95% limit.
And it could be a genuine game-changer for people stuck renting while trying to save.
So How Does It Actually Work?
The deal is a five-year fixed rate at 5.19%.
There’s no product fee and you get £250 cashback on completion.
You need a minimum deposit of £10,000.
So to actually get a 2% deposit, you’d be buying a property worth £500,000 – which is also the maximum the mortgage covers.
For most people, the deposit will work out somewhere between 2% and 5% depending on the property price.
The mortgage is only available on existing houses, not flats or new builds.
If you’re buying one of those, Santander still offers up to 95% LTV.
It’s exclusively for first-time buyers. You’ll need to go through a mortgage broker or Santander adviser – you can’t just apply online.
The maximum you can borrow is 4.45 times your salary. So if you earn £40,000, the most you could get is £178,000.
There are a few other restrictions too. Self-employed buyers can’t apply, and it’s not available in Northern Ireland.
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Why Are They Doing This Now?
Santander says more than half of UK adults find saving for a deposit the biggest barrier to buying a home. Which sounds about right.
Their own data shows the average first-time buyer with Santander put down over £85,000 last year. For a lot of people, that figure might as well be a million.
Rising rents, bills, and childcare costs make it almost impossible to save thousands while also paying to live somewhere.
What's the Catch?
The main risk is negative equity. If you only put down 2% and house prices drop even a little, you could end up owing more than your home is worth.
That would make it very difficult to remortgage or move.
The rate of 5.19% is also higher than what you’d get with a bigger deposit. A 10% deposit could get you rates closer to 4.5% right now.
But if the alternative is renting indefinitely while house prices keep climbing, this might still make sense for some people.
What Do the Experts Reckon?
Mortgage brokers have given it a cautiously positive reception.
One broker called it “a big psychological shift for this part of the market” because the deposit has always been the biggest hurdle – not the monthly payments.
Another pointed out there’s now “an increasingly healthy range of mortgages for those with little or no deposit,” which is a change from even a year ago when options were very limited.
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Disclaimer: Content on this page is for informational purposes and does not constitute financial advice. Always do your own research before making a financially related decision.
