Santander has launched the My First Mortgage deal (Image: Getty)
Santander has launched a 98% mortgage product available to first-time buyers. The « My First Mortgage » will launch with a rate of 5.19% and requires a minimum £10,000 deposit.
The five-year fixed rate mortgage has a maximum lending of up to £500,000, which is repayable between five and 40 years. Although the new product indicates a « shift in the market », experts have warned that the 98% loan-to-value figure gives buyers a « lack of headroom », as a fall in property value may leave them exposed to negative equity. This will reduce their flexibility when it comes to moving.
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Nicholas Mendes, mortgage technical manager at John Charcol, said: « Santander is the latest lender to help first-time buyers with less than a five per cent deposit, and they are the first mainstream high street name to go beyond 95 per cent LTV and push to 98 per cent.
« 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. »
He added that the 5.19% fixed rate with no fee will give first-time buyers with a smaller deposit an easy route into the market. Mr Mendes said this indicates that the market is « steadily improving ».
However, he noted: « The main consideration is the lack of headroom. At 98% LTV, even a modest fall in property values can leave a borrower more exposed to negative equity, which can reduce flexibility when it comes to remortgaging or moving.
The deal is available to first-time buyers (Image: Getty)
« That is why borrowers should treat it as a longer term plan, keep a buffer, and where possible use overpayments to bring the loan to value down towards 95 per cent or 90 per cent over time, which is where pricing typically gets more competitive. »
David Hollingowrth, associate director at L&C Mortgages, continued: « 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. 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. »
Santander is the largest lender so far to step beyond the typical 5% minimum deposit requirement (Image: Getty)
Santander UK head of homes David Morris says: « 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, 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. »
