The year is off to a positive start for those coming off a fixed mortgage, or on variable/tracker mortgages, as the Bank of England announced a (much anticipated) 0.25% cut to the base rate on 18th December. This takes it down to 3.75%, and consequently has seen lenders begin to cut their rates. Although the current average mortgage rate is now 4.86%, some are significantly lower, which would indicate a confidence among markets that rates will drop further in future MPC (Monetary Policy Committee) meetings, to around 3% - 3.25%. This appears to have already been priced in by lenders.
This comes at a time when month-to-month house prices have dropped, seeing a reduction of 0.4% in December. Meanwhile, the annual growth rate of house prices slowed to 0.6%. All of this, according to Halifax, means there has never been a better time to be a first time buyer.
For those selling a property to move to a different one, the situation is marginally less rosy, as there is a greater selection of properties at more reasonable prices, however that could reduce your power to sell your existing property.
It could be said that current market conditions mean it’s a buyers market, which somewhat takes the wind out of the sails of landlords and the buy-to-let market.
If you are a landlord, there’s a couple of things to remember for the upcoming tax year:
- Making Tax Digital for Income Tax Advice (MTD ITSA) comes into force from April 2026 for Landlords who’s total annual gross income exceeds £50,000. This will see those affected need to Keep digital records of income and expenses in compatible, MTD-ready software, send quarterly updates for each income source (self-employment and/or property), and make a Final Declaration by January 31stafter the tax year to confirm your complete position (this replaces the Self-Assessment return). Our friends at Danbro Business Accounting have gone into greater detail on this, here.
- Dividend Tax Rates will increase from April 2026, which will impact those landlords who take a proportion of their pay through dividends. You can read more about that in our Budget 2025 guide, but as a reminder:
- Basic rate: rising from 8.75% to 10.75%
- Higher rate: rising from 33.75% to 35.75%
- Additional rate remains unchanged at 39.35%
- Tax rates for rental incomes have also increased, mirroring the changes to interest rates:
- Basic Tax Rate: 20% to 22%
- Higher Tax Rate: 40% to 42%
- Additional Tax Rates: 45% to 47%
100% Deposit Mortgages
Interestingly, the UK has seen a small number of 100% Mortgages return to the market. Also known as No-Deposit Mortgages, these aptly named mortgage products are marketed as an opportunity for those trying to get on the property ladder to do so, even if saving for a deposit proves difficult. Providers, who include, April, Gable and Skipton, suggest that those who have a steady income and clean credit, but who struggle to save a deposit because of the high costs of renting, could benefit from this type of mortgage.
However, their arrival has been met with a fair amount of scepticism. One of the concerns over a mortgage with no deposit is the higher interest rates they typically entail due to the very high loan-to-value (LTV) ratio – the amount of money loaned compared to the total value of the property. Due to the increased risk for lenders, loans with a 95% + LTV can attract whole percentages in additional interest compared to a mortgage with a deposit of 5-10% LTV.
Moreover, they can put borrowers in a tricky situation should the value of their home drop – as initial equity is low, and mortgage rates are high, a drop in the property’s value can quickly lead to negative equity – where the remaining mortgage to be repaid is more than the property is actually worth.
Some of the concern arises from the lasting memory of the sub-prime mortgage crisis, where mortgages were being sold to people who would likely not be able to repay them.
The ill-fated UK institution Northern Rock notoriously dabbled in these sub-prime mortgages, in some cases with an LTV of 130%, in co-operation with US financial behemoth Lehman Brothers, before both failed catastrophically at the height of the 2008 Financial Crisis.
With that said, both the markets and the lenders are arguably approaching with greater trepidation this time around. Some lenders require a guarantor, such as a family member, to commit an amount as collateral should the borrower default. Others, such as April, reduce interest rates as the LTV drops to incentivise repaying quickly. Skipton, meanwhile, refers to their offering as a ‘Track Record Mortgage’, aimed at renters with a strong credit history, and adds the option of making a small deposit to reduce LTV.
In any case, it appears that 100% Mortgages are here to stay, with a defined role as a niche offering to help those stuck in a rental trap get on the property ladder. For many though, a mortgage and deposit will be more affordable in the long term.
Whether you’re a landlord, first time buyer, looking to move, or are simply approaching the end of your current deal, get in touch with one of our specialist mortgage advisers today.
Get in Touch with Danbro Financial Planning
Your home may be repossessed if you do not keep up repayment on your mortgage or other debt secured on it. The Financial Conduct Authority does not regulate Buy-to-Let mortgages.
Charlie Sturgess
Charlie is a Designer in Danbro's Marketing team. He is responsible for producing creative assets and content for use across the group's various channels.
His background is varied, having studied Design and English, and worked in the financial services as an administrator.
Outside of Danbro, Charlie can be found up a climbing wall, or watching the F1.
