Buy-to-let lending remains stable

Latest buy-to-let lending by UK Finance for Quarter 2 (Q2) has found that there were 49,590 new buy-to-let loans advanced in the UK, worth £8.8 billion. This was relatively flat compared with the same quarter in the previous year, down 2.6 per cent by number (0.2 per cent by value).

The average gross buy-to-let rental yield for the UK in Q2 2025 was 7.26 per cent, compared with 6.9 per cent in the same quarter in the previous year. The average interest rate across all new buy-to-let loans in the UK was 5.0 per cent in Q2 2025. This was 2 basis points higher than in the previous quarter, and 19 basis points lower than in the same quarter of 2024.

Reflecting the downwards movement in interest rates, the average buy-to-let interest cover ratio (ICR) for the UK in Q2 2025 was 210 per cent, up from 192 per cent in Q2 2024 and 201 in the previous quarter. The number of BTL fixed rate mortgages outstanding in Q2 2025 was 1.47 million, 5.5 per cent up on a year previously. In contrast, the number of variable rate loans outstanding fell by 18.0 per cent to 463,000.

At the end of Q2 2025 there were 11,270 buy-to-let mortgages in arrears greater than 2.5 per cent of the outstanding balance. This was down 560 from the previous quarter. There were 790 buy-to-let mortgage possessions taken in Q2 2025, up 11.3 per cent on the same quarter a year previously.

Louisa Sedgwick, Managing Director of Mortgages at Paragon Bank, said “Although mortgage completions were lower than the first quarter of the year and when compared to the same period in 2024, they must be viewed in the context of the market distortion brought about by changes to Stamp Duty at the end of March. Landlords brought forward transactions to benefit from the higher Stamp Duty thresholds and lower their tax exposure.

“There were over 9,500 mortgaged house purchase completions in March, compared to fewer than 3,500 in April, highlighting the impact of changes to Stamp Duty on the normal flow of business. However, market activity has been positively building back up throughout the second quarter and into the third.

“More broadly, it’s also interesting to note an uplift in the value of outstanding balances. These have been increasing since the second half of last year and now sit above £300 billion, something not seen since the second quarter of 2023.”

Heather Hancock, head of credit & operations at Black & White Bridging, said “Prospective landlords can’t just walk into an estate agent and buy a rental property in the same way they could previously. The field has changed. There’s still money to be made in the rental market, but it won’t fall into your lap anymore. Landlords are having to work harder.

“A drop in the value of new buy-to-let lending and the number of buy to let loans, highlights that we are seeing landlords exiting the market, as backed by our own recent survey data. But we believe these are accidental and amateur landlords, leaving the industry with a more professional cohort. Growth in the value of new BTL lending to SMEs, up 11.7 per cent YoY, supports this and highlights just how many landlords have set up limited companies in recent years due to the tax advantages.

“These landlords are more likely to look to refurbishment or conversion projects to broaden their portfolios, which is driving demand for specialist finance ahead of buy-to-let loans. We aren’t saying there aren’t good yields to be had, but to make waves in the current climate landlords need to take advantage of lending options, like bridging, that they wouldn’t have needed previously.”