Buy to let lending rebounds as lender possessions rise – UK Finance

New buy to let lending rose sharply in the third quarter of 2025, with 59,467 loans completed across the UK, together worth £10.9bn.

The data from UK Finance reveals that the total marked a strong annual uplift, climbing 22.7% by volume and 28.2% by value compared with the same period a year earlier.

It also says that mortgage arrears continue to trend downwards and by the end of September, 10,420 BTL mortgages were more than 2.5% in arrears, a quarterly fall of 850 cases.

However, buy to let lenders took possession of 900 BTL properties during the quarter, up 28.6% from 700 a year earlier.

Yields rise

Average gross rental yields reached 7.15% during the quarter, up from 6.93% in Q3 2024.

Borrowing costs continue to ease and the typical interest rate on new buy to let mortgages fell to 4.85%.

That’s 15 basis points lower than the previous quarter and 37 basis points below the level recorded a year earlier.

UK Finance also found that the average interest cover ratio climbed to 215%, compared with 195% last year and 210% in Q2.

Outstanding fixed rate buy to let mortgages rose to 1.44 million, a 2.3% annual increase, while variable-rate loans dropped 9.7% to 488,000.

Property sector reaction

Megan Eighteen, ARLA Propertymark‘s president, said: “These figures point to a more positive sentiment in the buy to let market during the third quarter of 2025.

“However, the rise in buy to let mortgage possessions over the same period a year earlier is a clear reminder that affordability pressures persist for some landlords, particularly those facing higher borrowing and operating costs.”

Marylen Edwards, director of mortgages at specialist lender MT Finance, said: “This data provides a compelling snapshot of a market in strategic transition.

“While the industry prepares for the Renters’ Rights Act changes which start to come into force from May 1st, professional landlords aren’t just surviving, they are recalibrating.

“We are seeing an increased year-on-year surge in lending value, while the average interest rate for new BTL loans has eased to 4.85%, down 37 basis points from a year ago.”

Howard Levy, director of mortgage broker SPF Private Clients, said: “For me the most interesting point is that the ICR coverage was 215%.

“This would potentially mean that rates were booked and fixed at a low point, that LTVs are low on average or rents have risen drastically.

“In reality, it is probably a combination of all of these, but if rents do continue to rise to cover the extra costs that the government are requiring landlords to pay, then we can expect this figure to rise even further.”

Louisa Sedgwick, the managing director of mortgages at Paragon Bank, said: “The marked uplift in the value and number of buy to let mortgages written compared to the previous quarter, and particularly the same period a year ago, demonstrates how landlords will invest in buy to let property when market conditions allow.

“The third quarter saw strong levels of remortgage activity, the highest since the final quarter of 2022, partly driven by landlords releasing equity to fund new acquisition.

“This continued the trend from the first half of the year, which saw more equity withdrawn at remortgage for portfolio expansion than any other corresponding period since 2018.”