UK Finance has today published its quarterly update on the UK’s buy-to-let (BTL) mortgage market, revealing a significant uptick in lending activity and a continued shift in borrower behaviour during the Q1 2025.
According to the report, 58,347 new buy-to-let loans were advanced in Q1 2025, with a total value of £10.5bn.
This marks a sharp increase of 38.6% by number and 46.8% by value compared to the same period in 2024, signalling a strong resurgence in investor confidence in the rental property sector.
The average gross rental yield for buy-to-let properties across the UK stood at 6.94% during the quarter, a slight rise from 6.88% recorded in Q1 2024.
Meanwhile, interest rates on new BTL loans averaged 4.99%, representing a 0.10% drop from the previous quarter and 0.41% lower than in Q1 2024.
Reflecting this downward movement in rates, the average buy-to-let interest cover ratio (ICR) remained stable at 202%, unchanged from the previous quarter but notably higher than the 190% reported a year earlier.
The data also shows a shift in loan type preferences.
The number of outstanding fixed-rate BTL mortgages rose to 1.44 million, an increase of 4.99% year-on-year.
Conversely, the number of variable-rate BTL loans dropped sharply by 15.8% to 500,000.
UK Finance also reported a decline in arrears, with 11,830 BTL mortgages in arrears of more than 2.5% of the outstanding balance by the end of Q1 2025.
This figure is down by 780 from the previous quarter, suggesting some improvement in repayment performance among landlords.
However, there was a rise in repossessions.
A total of 810 buy-to-let mortgage possessions were recorded in Q1 2025, a 28.6% increase compared to the same quarter last year.
