Low Deposit Mortgages in the UK: Santander’s 2% Deal Is Good News – But It’s Not the Only Option

The February 2026 announcement from Santander regarding its “My First Mortgage” 2% deposit deal has brought renewed attention to low-deposit homeownership in the UK.

It’s a positive signal. When major high-street lenders support first-time buyers (FTBs), it helps people onto the property ladder and supports the wider economy. However, headline figures don’t always tell the full story. While Santander’s scheme will suit some, the strict 2026 eligibility criteria mean many buyers—particularly those in urban areas—will need to look elsewhere.

Santander’s 2% Deposit Mortgage: How It Works in 2026

Santander’s mortgage allows eligible FTBs to purchase with a 98% Loan-to-Value (LTV), but there are several “fine print” conditions that buyers must navigate:

• The £10,000 Floor: Regardless of property price, a minimum deposit of £10,000 applies.
• Property Exclusions: Crucially, this deal is for existing houses only. It is not available for flats, maisonettes, or new-build properties.
• Geographic Limits: The product is currently not available in Northern Ireland.
• Income Caps: Lending is capped at a 4.45x loan-to-income (LTI) multiple, whereas standard Santander products often reach 5.5x.
• Employment: It is currently unavailable to self-employed applicants.

The Reality Check: On a property priced at £250,000, a 2% deposit is technically £5,000. However, because of the £10,000 minimum rule, your actual contribution is 4%. If you are buying a flat in London or a new-build home, this product is off the table entirely.

Low Deposit Mortgage Comparison (February 2026)

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Other Low-Deposit Mortgage Options Available

Shared Ownership: Lower Cash Upfront

Shared ownership remains the most accessible route for those who cannot meet Santander’s £10,000 minimum.

• Real World Case: On a £250,000 home with a 25% share (£62,500), a 10% deposit on that share is only £6,250.
• The Benefit: This is nearly £4,000 less than the cash required for the Santander 2% deal, and it is available for flats.

New-Build Incentives

Since Santander excludes new builds from their 98% LTV deal, buyers should look toward developer contributions. Many developers in 2026 offer 5% deposit matches, effectively giving you a 10% deposit for the price of 5%, which unlocks much lower interest rates (often sub-4.5%).

The “Track Record” 0% Option

For those with zero savings but a perfect rental history, lenders like Skipton Building Society offer 100% LTV mortgages. While the rate is slightly higher, it removes the “deposit barrier” entirely for those who have proven they can afford monthly payments through their rent.

The Trade-Off: Interest Rates vs. Deposit Size

The 2% deposit comes with a premium. The current 5.19% rate on the Santander deal is significantly higher than a standard 90% or 95% LTV mortgage.

• Santander 2% Rate: ~5.19%
• Market Best 5% Deposit Rate: ~4.53%

On a £200,000 mortgage over 25 years, that 0.66% difference costs approximately £80 extra per month. Over a 5-year fixed term, that is £4,800 in extra interest.

Why Advisor-Led Planning Matters

At WIS Mortgages, we have completed over 4,000 mortgages. Because our directors come from an accounting background, we don’t just look at the mortgage—we look at your entire tax and income structure to find the most efficient route.

We help you navigate:

• Income Stretching: Accessing up to 5.5x or 6x income with specialist lenders.
• Visa & Residency: Specialist 5% deposit options for foreign nationals.
• Property Type Issues: Finding lenders who will accept 5% deposits on flats and maisonettes.

Internal Links (WIS Mortgages)

• Read the Guide : FIRST-TIME BUYER MORTGAGES UK: COMPLETE 2025 GUIDE
• Watch the video: Talk of the Town! Shared Ownership
• Check Affordability Calculator: Mortgage Affordability Calculator

About the Author: Ifthikar Mohamed

Ifthikar Mohamed is a Director at WIS Mortgages with over 10 years of experience in the UK financial sector.

Uniquely, Ifthikar began his career as a Financial Accountant before transitioning into mortgage broking. This dual expertise allows him to provide a “one-stop-shop” for clients, particularly contractors and the self-employed, who require a sophisticated understanding of income and tax to satisfy strict lender criteria.

He has overseen more than 4,000 mortgage applications, helping first-time buyers navigate affordability challenges and secure homes even in complex specialist lending scenarios.

Ifthikar is a regular contributor to industry insights and part of the leadership team at WIS Mortgages, an award-winning firm recognized for its excellence in client outcomes.

Final Thoughts

Santander’s 2% mortgage is a welcome development, but it’s a “niche” product for a specific type of buyer. If you’re buying a flat, are self-employed, or want a lower interest rate, you have better options.

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Important FCA Warning

As a mortgage is secured against your home, it may be repossessed if you do not keep up the mortgage repayments.