Santander has unveiled a groundbreaking new mortgage product designed specifically to assist first-time buyers in stepping onto the property ladder. The bank's My First Mortgage offering provides a five-year fixed-rate deal that covers up to 98% of the purchase price, significantly reducing the traditional deposit barrier.
A Major Shift in Deposit Requirements
This innovative mortgage product represents a substantial departure from the standard minimum deposit requirements that have long challenged aspiring homeowners. While most lenders typically require at least a 5% deposit, Santander's new deal allows borrowers to secure a property with as little as 2% down payment, provided they can contribute a minimum of £10,000.
The mortgage comes with a competitive fixed rate of 5.19% for the initial five-year period, and notably includes no arrangement fee, making it particularly attractive for those with limited upfront capital.
Industry Response to the New Product
David Hollingworth, associate director at L&C Mortgages, commented on the significance of this development, stating: "This is an important addition from a major lender, adding to the growing ranks of mortgages designed to ease the struggles of first time buyers."
He continued: "There's an increasingly healthy range of mortgages for those with little or no deposit. These products do carry eligibility requirements so won't fit everyone's requirements and a bigger deposit will still offer a wider choice with lower rates. However, the new Santander deal should help more to access homeownership sooner than they may have thought possible."
Current Mortgage Market Context
The launch comes at a time when other major lenders are adjusting their rates in the opposite direction. Nationwide Building Society recently increased selected fixed rates by up to 0.19%, while Virgin Money implemented hikes of up to 0.14% on certain products.
Meanwhile, property prices continue their gradual upward trajectory. Recent data reveals that average property values increased by 0.3% last month, with annual house price inflation reaching 1% in January.
Affordability Considerations
Despite these price increases, affordability has shown improvement across most regions. Robert Gardner, Nationwide's Chief Economist, noted: "All parts of the UK, with the exception of Northern Ireland, saw an improvement in affordability over the past year."
He elaborated on the current situation: "Our main affordability benchmark shows that a prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 32% of their take-home pay – slightly above the long-run average of 30% and well below the recent high of 38% recorded in 2023."
Santander's new mortgage product represents a significant development in the ongoing effort to improve accessibility to homeownership, particularly for those struggling to accumulate substantial deposits in the current economic climate.
