Santander Introduces Controversial 98% Mortgage with Stringent Conditions
Santander UK has unveiled a new mortgage product that allows first-time buyers to borrow up to 98% of a property's value, but financial experts are warning that the accompanying rules are exceptionally strict and could exclude significant numbers of potential homeowners.
Exclusive Eligibility Criteria Raise Accessibility Concerns
The high street banking giant, which maintains branches across Birmingham and throughout the United Kingdom, has implemented a series of restrictive conditions that mortgage brokers believe will limit the product's practical application. The deal is exclusively available to first-time buyers and must be secured as a five-year fixed-rate loan, with Santander demanding a minimum deposit of £10,000 and imposing a maximum borrowing limit of £500,000.
Industry professionals have highlighted several particularly limiting factors: self-employed buyers are completely excluded from the scheme, and for joint mortgage applications, both applicants must be first-time buyers. These restrictions have prompted serious questions about how many aspiring homeowners can realistically qualify for the product.
Regional Property Price Challenges and Industry Response
The £500,000 maximum loan presents particular challenges in higher-priced regions of the country. In London, where the average house price reached £539,000 in December, this ceiling would leave buyers with a significant shortfall. Paula Higgins, Chief Executive of the HomeOwners Alliance, commented: "Taken together, these restrictions raise real questions about how many first-time buyers can realistically benefit, particularly in higher-priced parts of the south-east where £500,000 may not go far."
Higgins further expressed concern that "excluding some buyers is a worrying signal and risks putting ownership further out of reach for many." Meanwhile, Aaron Strutt of Trinity Financial suggested that Santander's move "may well tempt other big lenders back into offering more sub-5% deposit mortgages to new customers," potentially influencing broader market trends.
Santander's Perspective on Homeownership Challenges
David Morris, Head of Homes for Santander UK, defended the product by highlighting the persistent challenges facing first-time buyers: "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 £85,000, a figure that can feel unattainable for today's aspiring homeowners."
Morris cited multiple contributing factors including modest incomes, limited family financial support, rising rental costs, and childcare expenses. He explained the bank's rationale: "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."
The introduction of this mortgage product represents a significant development in the UK housing market, balancing increased accessibility for some first-time buyers against what industry observers describe as unusually restrictive qualifying criteria that may limit its broader impact.
