Buy to let lending rises as remortgaging drives growth

Landlords are refinancing in greater numbers as borrowing costs ease, while new purchase activity continues to trail last year’s levels, data reveals.

The figures from UK Finance show lending volumes are rising, driven mainly by remortgaging rather than landlords investing in new properties.

It reports that 59,489 buy to let loans were advanced in Q4 2025, totalling £11.2 billion.

That’s 18.2% higher by number and 21.3% up by value compared with the same period a year earlier, with most of that increase tied to landlords switching deals.

There are also fewer landlords in arrears with 9,520 mortgages more than 2.5% in arrears at the end of the quarter, 910 fewer than three months earlier.

Possession figures have risen year-on-year with 770 properties taken into possession, up from 700 in Q4 2024.

BTL lending will be flat

The organisation’s head of analytics, James Tatch, said: “The buy to let market overall was resilient at the end of last year, with the number of loans advanced around a fifth higher than at the same time the previous year.

“But, with growth concentrated in remortgage markets, new demand for BTL purchase remains fragile, falling slightly in Q4 compared with the same quarter a year ago.”

He added: “Investors took advantage of falling interest rates to refinance their borrowing, although instability in the mortgage market in recent weeks has pushed up borrowing costs, which may well dampen the growth BTL remortgaging somewhat.

“However, a combination of the regulatory and tax measures already in place, combined with the measures in the Renters’ Rights Act, are likely to continue to weigh down on new demand activity.

“We expect a broadly flat picture for BTL purchase lending this year, compared to levels seen a year ago.”

Yields are rising

UK Finance also fund that yields have risen slightly with the average gross return reaching 7.18% in the final quarter.

That compares with 6.99% a year earlier, reflecting changes in rent levels alongside property pricing.

Fixed rates continue to dominate product choice and outstanding fixed rate loans rose to 1.46 million, up 2% year-on-year.

However, variable rate borrowing fell again, down 9.8% to 466,000.

New loans carried an average rate of 4.77%, eight basis points lower than the previous quarter and 32 basis points below the same period in 2024.

The average interest cover ratio increased to 218%, up from 201% a year earlier and 215% in the previous quarter.

Property sector reaction to UK Finance data

Megan Eighteen, the president of ARLA Propertymark, said: “Latest figures from UK Finance show buy to let resilience, but this is largely driven by remortgaging rather than new investment, highlighting continued fragility in purchase activity.

“Strong tenant demand continues to underpin the sector, providing some stability for existing landlords, although wider economic uncertainty, including global events, may influence borrowing costs in the months ahead.”

Raheel Butt, the head of BTL underwriting at MT Finance, said: “This data provides a definitive conclusion to a year defined by professional resilience.

“The final quarter saw the momentum of the year-on-year surge in lending value reach its peak.

“This activity was fuelled by a continued easing of borrowing costs.”

Louisa Sedgwick, the managing director of mortgages at Paragon Bank, said: “UK Finance’s Q4 2025 figures indicate that landlord confidence was beginning to improve towards the end of last year.

“The data shows a clear pickup in activity, with both lending volumes and values up materially on the same quarter in the previous year.

“While the figures pre-date the latest rise in geopolitical tensions and the resulting pressure on rates and mortgage pricing, they still point to underlying resilience in the sector.”

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