The UK’s buy-to-let (BTL) mortgage market remained broadly stable in the second quarter of 2025, with modest growth in yields and improving arrears performance, according to UK Finance’s latest Buy-to-Let Mortgage Market Update.
A total of 49,590 new buy-to-let loans were advanced in Q2 2025, worth £8.8bn – down 2.6% by volume and 0.2% by value compared with the same period last year.
Average gross rental yields rose to 7.26%, up from 6.9% in Q2 2024, reflecting continued strength in rental income despite a subdued lending environment.
The average interest rate on new buy-to-let loans was 5.0%, up slightly from the previous quarter but 19 basis points lower than a year earlier.
As a result, the average interest cover ratio (ICR) improved to 210%, up from 192% in Q2 2024.
UK Finance also reported a shift in product preferences, with the number of outstanding fixed-rate buy-to-let mortgages rising 5.5% year-on-year to 1.47 million, while variable-rate loans fell 18% to 463,000.
Arrears performance showed further improvement, with 11,270 buy-to-let mortgages more than 2.5% in arrears at the end of Q2 – 560 fewer than in the previous quarter.
However, possessions increased to 790 cases, up 11.3% compared with Q2 2024.
The data suggested the buy-to-let sector has remained resilient through 2025, with stronger rental yields and improving affordability metrics offsetting muted lending volumes and continued pressure from higher financing costs.
