The buy to let mortgage market remains relatively flat in terms of new landlords and new purchases.
Data from UK Finance shows that in Q2 2025 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% by number.
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. And the average interest rate across all new buy-to-let loans in the UK was 5.0%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%, up from 192% in Q2 2024 and 201 in the previous quarter.
The number of BTL fixed rate mortgages outstanding in Q2 2025 was 1.47m, 5.5% up on a year previously. In contrast, the number of variable rate loans outstanding fell by 18.0% 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.
Mark Harris, chief executive of mortgage broker SPF Private Clients, comments: “The buy-to-let market does not appear to be faring too badly, as mortgage rates continue to fall and rents increase.
” … The lending environment is certainly encouraging, with lenders having plenty of money to lend and are keen to do so. Not only have buy-to-let mortgage rates reduced throughout the year, but lenders have also been improving their criteria.
“Those landlords borrowing via a limited company are also benefiting from a wider choice of products and falling mortgage rates, although these are still pegged higher than for landlords buying in their own name. However, given the potential savings of incorporation – particularly for those landlords with large portfolios who can offset costs and mortgage interest against the rents – these higher rates are typically more than offset.
“The buy-to-let market is undoubtedly heading towards professional landlords predominantly running the private rented sector and whether to incorporate or not is one of the big questions facing landlords.
“We are seeing many clients seek advice on this. It is an involved process which requires plenty of advice from a specialist broker who understands the market and timings involved, and who will work closely with the landlord’s tax advisers to ensure the landlord meets all the criteria for the incorporation. It’s about planning ahead, seeking advice and taking a longer-term view.”
Louisa Sedgwick, managing director of mortgages at Paragon Bank, says: “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.”
Megan Eighteen, President of ARLA Propertymark, comments: “These mixed results highlight the ongoing uncertainty facing the buy-to-let market, driven by wider economic pressures. Inflation remains stubbornly high, interest rates are still elevated compared to pre-pandemic levels, and Stamp Duty thresholds are less favourable than in the same period last year. Combined with the anticipation surrounding the upcoming Autumn Budget, many investors are choosing to hold off on decisions until there is greater clarity.
“That said, there are still reasons for cautious optimism. Some areas of the country are seeing improved rental yields compared to this time last year, and the number of buy-to-let mortgages in arrears has declined since the previous quarter.
“We hope to see economic conditions stabilise in the near future to support a stronger and more confident buy-to-let sector.”
This article is taken from Landlord Today