Mortgages requiring a 1pc down payment can increase risks for banks, and distort financial incentives for homeowners.
The government is looking into plans to introduce a mortgage of 99 percent for first-time home buyers.
Jeremy Hunt is considering the proposal ahead of the Budget on March 6, in order to assist people with getting onto the housing ladder.
Santander UK’s chief executive Mike Regnier said that he would be “very happy” if Santander UK offered a mortgage of 95pc to new buyers, but he needed assurances before approving the plan for 99pc.
If the government wants to push [to a 99pc], then something else would have to be done than just offering 95pc mortgages at 99pc. We welcome any initiative that supports first-time homebuyers, but we need it to be accompanied by the proper protection and structure.
In April 2021, a government-backed scheme of mortgage guarantees, launched by the federal government, gave banks assurances about potential losses. This helped to usher in an influx of mortgages worth 95 percent.
Even a deposit of 5 percent is considered unrealistic for first time buyers, when the average price of a house is £290,000.
Skipton Building Society is the only mortgage provider on the market that offers a 100% mortgage.
Mr Regnier stated that borrowers would have less to lose if they were offered a mortgage with only a 5% deposit instead of a 1% deposit.
He said that the customer had a legitimate interest in keeping repayments at 95pc because of their economic interest.
As soon as the house price drops by 1pc to 99pc, the customer’s economic interest is gone and the rules change.
Last year, the bank’s pre-tax profit increased by 13pc to £2.1bn, mainly due to higher interest rates for deposits.
Santander is owned by Banco Santander in Spain. It closed six branches in 2018 and, unlike its competitors, it has no plans to do so again until 2024.
Santander Work Cafes are now available in three branches, with several more to follow this year.
Santander UK (originally known as Abbey National) is the fifth largest bank in the UK with nearly 20,000 staff and 14 million customers.
Around 450 branches are located in Britain.