The UK buy-to-let market saw significant growth in the first quarter of 2025, with new lending up sharply both by number and value, according to the latest figures from UK Finance.
A total of 58,347 new buy-to-let loans were advanced in Q1 2025, representing a 38.6% increase compared with the same period last year. The total value of new loans reached £10.5bn, a rise of 46.8% on an annual basis.
The average gross rental yield for UK buy-to-let properties was 6.94% in Q1, marginally higher than the 6.88% recorded in the first quarter of 2024.
Interest rates across new buy-to-let loans continued to ease. The average rate stood at 4.99%, down 10 basis points from the previous quarter and 41 basis points lower than a year earlier. This reduction in interest rates was reflected in an improved average interest cover ratio, which rose to 202% in Q1 2025 from 190% in the same period of 2024.
The number of outstanding fixed rate buy-to-let mortgages increased to 1.44 million, up 4.99% year-on-year. Conversely, the number of variable rate loans outstanding fell by 15.8% to 500,000.
Arrears in the sector showed a slight improvement. At the end of Q1 2025, there were 11,830 buy-to-let mortgages in arrears greater than 2.5% of the outstanding balance, down by 780 compared to the previous quarter.
However, the number of buy-to-let mortgage possessions rose. There were 810 possessions taken in Q1 2025, an increase of 28.6% on the same quarter last year.
Nathan Emerson, CEO at Propertymark, commented that it was “positive to witness” what he hopes is a wider scale revival in buy-to-let lending across Q1 of 2025.
He said: “This trend has likely been encouraged by interest rates on buy-to-let loans being lower than they were in the same quarter for 2024. These numbers demonstrate that more competitive interest rates are helping to attract more people to the buy-to-let market.
“However, with mortgage possessions up this quarter from the same quarter a year previously, these figures also highlight there are still significant affordability issues for those engaging in buy-to-let borrowing in recent years.”
Emerson added: “The Bank of England continues to work hard managing inflation levels, and the direction of travel here will prove key within all base rate decisions moving forwards.”
Tony Hall, head of business development at Saffron for Intermediaries, said the figures showed the buy-to-let market is stabilising and welcomed the early signs of renewed confidence.
He commented: “We’re seeing a shift in sentiment, not just amongst lenders that are pricing more competitively, but landlords who are beginning to re-engage in the market. Encouragingly, rental yields remain stable across most regions, interest rates are falling, and new lenders have joined the limited company buy-to-let space, giving brokers a solid foundation to work from.”
He added: “If inflation continues to ease and interest rates fall again later this year, we can expect stronger momentum and increased opportunities for brokers to support buy-to-let in the second half of 2025.”
