Santander launched a new 98% Loan to Value mortgage in February 2026.
At first blush, a 98% mortgage will really help first-time buyers need to get on the housing ladder. But is there a catch?
In this blog we look at the small print of these mortgages and weigh up whether this product is something you should consider as a first-time buyer.
The deal
First, let’s have a look at the offer itself.
The good stuff
First-time buyers can borrow between £190,001 and £500,000 with a minimum deposit of £10,000. The maximum term for the mortgage is 40 years, which is attractively generous.
When it was first launched in February 2026, the Santander 98% mortgage came at a rate of 5.19%. That’s not too bad for a high LTV mortgage. In early 2026, average rates were below 5%, but in March and April 2026, average 2-year fixed rates for first-time buyers with 95% LTV reached approximately 5.45% to 5.90%.
With Santander’s mortgage, friends or family can gift you some or all of the deposit. The family member or friend giving you the money just needs to confirm that it’s not repayable, there aren’t any conditions, and they won’t have any legal interest or claim over the home.
The restrictions
Of course, there are restrictions on the deal too. It’s not available to everyone and for every home.
If you’re applying for the mortgage with a partner or a friend, both applicants must be first-time buyers.
Unfortunately, this mortgage is not available to self-employed people. That’s probably because the lender is taking on a higher level of risk with these mortgages and self-employed income can be unpredictable.
The home you’re buying cannot be a flat or a new build, and these mortgages are not available at all in Northern Ireland.
Potential problem: Income dependent
As is the case with any mortgage application, the lender will want to know that you can afford the repayments, so they will take your income into account.
For some 95% mortgages you can borrow up to 5.5 times your income.
However, with these 98% mortgages the maximum you can borrow is 4.45 times your income. This reflects the fact that lenders are taking on more risk with these mortgages.
So, if you earn £50,000 you can’t borrow more than £225,000. In places like Bristol and the South West, that means that you’re probably likely to need a higher deposit than 2% in order to afford your home. So you may be better off going for a lower LTV mortgage, with lower borrowing costs.
If you want to borrow the maximum £500,000 you will need to earn more than £112,000.
Potential problem: Restriction on which homes you can buy
You can’t buy a flats or a new build with these mortgages.
These are usually popular choices for first-time buyers, especially in Bristol and the South West. While you can still get 95% LTV mortgages for these homes, you won’t be eligible for the 98% LTV product.
Risk of negative equity
There’s a risk that house prices go down and you could end up owing more than the house is worth. If you only own 2% of your home, you’re more exposed to this risk.
However, this risk is low to moderate at the moment. House prices have been steadily increasing over the course of the last few years. They can fluctuate in your area, but generally house prices are quite resilient at the moment.
Should you get a 98% LTV mortgage?
The introduction of these mortgages is a welcome move, and shows that lenders are trying to find ways to support first-time buyers.
If you meet the eligibility criteria, then it’s a good product to go for.
Practically though, it looks like there will be limited options to use these mortgage products in Bristol and South West where house prices are higher, and you’d need to be a higher earner to borrow sufficient amounts.
We’d always recommend that you speak to a mortgage broker to find the best deal for you. If you’d like any suggestions for trusted brokers, we can point you in the direction of professionals we’ve worked with over the years.