The lender is increasing the proportion it will advance to first-time buyers looking to buy new-build flats from 70% to 80% of the property’s value, and for first-time buyers of new-build houses the limit will increase from 80% to 90%.

The change in criteria is aimed at helping those who have largely been frozen out of the housing market since the onset of the credit crisis to get a foothold on the property ladder. The bank’s loan-to-value (LTV) limits for non first-time buyers of newly built property will remain at 70% for apartments and 80% for houses.

A first-time buyer purchasing the typical £160,000 new-build house will now have to get together a deposit of £16,000, rather then the £32,000 previously required. Since the onset of the credit crisis lenders have shied away from higher loan-to-value lending on new-build property, to the chagrin of first-time buyers and house builders alike.

Builders have welcomed the move, while industry commentators say it is proof positive that competition is returning to the mortgage market, after almost two years of lenders giving first-time buyers the cold shoulder.

Stewart Basely, executive chairman of the Home Builders’ Federation, said: “Provided the terms and conditions are competitive, we know there is a huge pent-up demand for such a product.”

Santander will offer a two-year tracker at 4.99% with a £995 fee up to 90% loan to value, or a 5.99% three-year fixed rate with a £495 fee.