Santander launches 98% mortgage for first-time buyers – with strict rules | First-time buyers

One of Britain’s biggest banks has launched a mortgage that allows first-time buyers to borrow up to 98% of the property’s value; But experts said “too strict” rules would exclude many people and property types.

Santander said this was the first time in years that a major high street bank had gone beyond its traditional 95% borrowing limit, which some mortgage brokers described as “”bold and meaningfulIt’s a move that will help more first-time homebuyers realize their homeownership dreams.

The deal is a five-year fixed-rate loan for first-time buyers only, requiring a minimum deposit of £10,000; This is much less than the minimum required by most other deals, and the maximum amount that can be borrowed is £500,000.

The council regulator and the Bank of England are looking at ways to help more people get on the housing ladder and encourage banks to respond to changes in the way people live and work.

This is starting to be reflected in the UK mortgage market: in recent months many banks and housebuilders have announced that some customers will be able to access larger mortgages. While Santander is the biggest lender to go above 95% so far, it’s not the first: Skipton and Yorkshire building societies have offered deals allowing people to borrow 100% and 99% of a property’s value respectively.

However, experts who welcomed the latest announcement pointed out the restrictions and exceptions applied to Santander’s 98% mortgage. It is not available on flats, new build houses or any property in Northern Ireland.

Also, self-employed buyers are excluded, and both people must be first-time buyers to apply for a joint mortgage.

Meanwhile, the £500,000 maximum loan in areas such as London, where the average house price was £539,000 in December according to Halifax, will pose a problem for many potential buyers.

Santander said its data shows more than half (52%) of UK adults see saving a deposit as the biggest barrier to buying a property. Last year, the average first-time bank borrower deposited more than £85,000.

Paula Higgins, the The chief executive of the HomeOwners Alliance said a 98 per cent mortgage from a major lender could make a real difference for some, but strict eligibility criteria would limit how widely the product would be adopted.

“Taken together, these restrictions raise real questions about how many first-time buyers can realistically benefit, particularly in the high-priced areas of the south-east where £500,000 may not go far,” he said.

Higgins added that in urban areas, particularly London, flats are the main route to homeownership, so excluding them from first-time buyer mortgage products “is a worrying signal and risks putting ownership even further out of reach for many people”.

Aaron Strutt, of broker Trinity Financial, said Santander’s move “could encourage other major lenders to offer new customers more deposit mortgages at under 5%”.

However, those hoping to borrow the maximum £500,000 will need to earn more than £112,000 a year, as the most Santander can lend to someone taking the 98% deal is 4.45 times their salary.

First-time buyers borrowing up to 95 per cent from a bank will be able to get up to 5.5 times their salary, and a growing number of lenders including Nationwide and NatWest will now allow some home buyers to borrow up to six times their income.