UK Finance data shows stable lending volumes, higher yields, and fewer arrears in the sector
Buy-to-let lending in the UK remained largely unchanged in the second quarter of 2025, with 49,590 new loans advanced and a total value of £8.8 billion, according to UK Finance.
The average gross rental yield increased to 7.26%, up from 6.9% a year earlier, while the number of buy-to-let mortgages in arrears fell by 560 cases from the previous quarter.
Fixed rate buy-to-let mortgages outstanding rose by 5.5% year-on-year, and variable rate loans declined by 18%. Meanwhile, the average interest rate on new buy-to-let loans stood at 5%, and the average interest cover ratio improved to 210%.
“These mixed results highlight the ongoing uncertainty facing the buy-to-let market, driven by wider economic pressures,” said Megan Eighteen (pictured top left), president of industry body ARLA Propertymark. “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.”
Mark Harris (pictured top right), chief executive of mortgage broker SPF Private Clients, meanwhile, noted that despite reports of an exodus of landlords amid concerns about the imminent Renters’ Reform Bill, the buy-to-let market does not appear to be faring too badly.
“The lending environment is certainly encouraging, with lenders having plenty of money to lend and are keen to do so,” he said. “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.”
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