Santander Unveils 2 Percent Deposit Mortgage Deal

For many aspiring homeowners in Britain, scraping together a deposit has long felt like an insurmountable obstacle. Now, Santander UK is shaking up the market with a bold new offering: a mortgage product requiring just a 2 percent deposit, aimed squarely at first-time buyers. Announced on February 3, 2026, the bank’s ‘my first mortgage’ deal is making headlines for its ambition and potential to reshape the property ladder for a generation locked out by high upfront costs.

According to The Times, Santander—holding a significant 10 percent share of the mortgage market—has become the largest lender yet to offer mortgages to buyers with less than a 5 percent deposit. The deal is open to applicants across Britain, though notably excluding Northern Ireland, and is not available to self-employed individuals. All lending is subject to Santander’s broader affordability checks, meaning applicants will still need to demonstrate their ability to meet repayments under the bank’s criteria.

The numbers are eye-catching: buyers can put down as little as £10,000 and borrow up to £500,000, at a maximum of 4.45 times their salary. The fixed interest rate stands at 5.19 percent for five years, with no product fee. That’s not all—Santander is also throwing in £250 cashback for successful applicants. The loan-to-value (LTV) ratio is a striking 98 percent, a figure that would have seemed unthinkable not long ago, and applies to properties valued up to £500,000. However, there’s a catch: the deal is available only on existing houses, not new-builds.

For context, the average first-time buyer deposit with Santander last year was over £85,000, the bank revealed. In comparison, the new minimum deposit of £10,000 is a dramatic reduction, intended to make homeownership more attainable. Santander explained that the £10,000 minimum was chosen to protect buyers against the risk of negative equity—a scenario where the outstanding mortgage exceeds the property’s value if prices fall. As The Times notes, on November’s average house price of £271,188 (according to the UK House Price Index), a 5 percent deposit would have been £13,559. The new product, therefore, lowers the barrier by several thousand pounds.

Still, the deal is not without its trade-offs. The 5.19 percent fixed rate is higher than those available to buyers able to muster a 5 percent deposit. For example, a two-year fix from the Co-op Bank is currently available at 4.47 percent, and Nationwide Building Society offers a 4.53 percent rate. What does that mean in practical terms? On a £200,000 25-year loan, Santander’s deal would cost £1,191 per month, compared to £1,108 on the Co-op Bank rate. For many, that’s a significant difference, but the lower deposit requirement could tip the balance in favor of taking the plunge.

Why is this such a big deal? According to a January 2026 poll by the Building Societies Association, 64 percent of adults cited raising a deposit as the single biggest barrier to buying a home. The second and third most significant hurdles were the inability to borrow enough and the affordability of monthly repayments. Paul Broadhead from the Building Societies Association commented, “Anything that helps the deposit challenge is to be welcomed, and it is good to see lenders innovate to help address some of the first-time buyer challenges. It all gives a positive message that buying is possible and there is a range of products to suit a range of needs.”

The landscape for low-deposit mortgages has changed dramatically over the years. Before the 2008 financial crisis, mortgages with LTVs above 95 percent were widespread—sometimes, buyers could even borrow more than the property’s purchase price, as lenders bet on rising values. After the crisis, regulators tightened lending rules, and such products all but vanished. But in recent years, as the government and financial regulators have encouraged innovation to boost homeownership and economic growth, these high-LTV deals have been making a steady comeback.

According to data from Moneyfacts, there were 23 mortgage deals available above 95 percent LTV in January 2026, up from 16 a year earlier. The Financial Conduct Authority (FCA) reported that the share of new mortgages above 95 percent LTV in the third quarter of 2025 reached 0.59 percent of all new loans—the highest level since the second quarter of 2009. For comparison, in the third quarter of 2007, such loans made up 6.6 percent of all new lending.

Santander is not alone in this space. Building societies such as Newcastle and Yorkshire have launched similar deals with deposits as low as £5,000, while some lenders, including Skipton Building Society and April Mortgages, offer no-deposit products on certain terms. Meanwhile, major players like Barclays, HSBC, Nationwide, and NatWest now permit borrowing up to six times the applicant’s salary, a notable increase from previous years. The Bank of England, which capped high-leverage lending in 2016—limiting banks to 15 percent of mortgages exceeding 4.5 times income—has begun reviewing this rule, allowing some flexibility as long as the industry-wide average does not exceed the cap.

Most high street lenders have also reduced their stress test rates over the past year, following guidance from the FCA. These stress tests are designed to check whether an applicant could still afford repayments if interest rates were to rise, providing a safety net for both borrowers and lenders.

Not everyone is cheering the move toward lower deposits and higher leverage, however. James Daley from the consumer group Fairer Finance voiced concerns: “There are clearly real affordability issues in the housing market, but the solution cannot be to simply offer ever larger loans with lower deposits to first-time buyers. We’ve been lucky enough to have very low levels of repossessions over the past 15 years and very few people trapped in negative equity. That is largely due to the sensible borrowing rules that were put in place after the financial crisis. It’s disappointing to see that our political leaders have such short memories and are unwinding those safeguards in pursuit of a short-term boost to house prices.”

Financial experts, meanwhile, urge would-be buyers to seek professional advice before committing to any mortgage—especially one with a high LTV. While the promise of homeownership with just a 2 percent deposit is tempting, the higher monthly payments and risk of negative equity should not be underestimated.

Ultimately, Santander’s new product represents both a lifeline and a calculated risk. For some, it could be the key to finally stepping onto the property ladder. For others, it may signal a return to riskier lending practices that recall the pre-crisis era. One thing is certain: with innovation surging and lenders jostling to attract new buyers, the mortgage market in Britain is entering a new and unpredictable phase.