Buy to let mortgage lending plunges as landlords pause investment

Buy to let lending has taken a sharp fall, with Bank of England figures showing a 12.5% drop in loans agreed between June and August.

The slump follows three consecutive quarters of growth and signals a sudden loss of confidence among landlords as speculation mounts over possible tax hikes in the upcoming Autumn Budget.

Peter Stimson, the director of Mortgages at MPowered Mortgages, said the once-buoyant buy to let market has ‘ground to a halt’.

He added: “The buy to let mortgage market ground to a halt a year ago, and there has since been a steady exodus of small-time landlords from the market.

“But rather than dying, as many feared, the market was kept alive by steady demand from professional buy-to-letters.

“But after three successive quarters of rising demand for buy to let mortgages, things slammed into reverse during the third quarter of 2025.”

Landlords brace for tax hikes

Mr Stimson said sentiment has soured as landlords brace for potential tax hikes in the Autumn Budget.

He said: “The sector’s anxiety about the potential for further tax increases in next month’s Budget is a key factor in the slowdown.”

He added that years of shifting policy have eroded confidence.

Mr Stimson said: “Successive Chancellors have painted a target on the backs of buy to let owners, removing valuable tax breaks and introducing a punitive Stamp Duty surcharge that kicks in whenever they buy a property.

“With rumours now swirling that they might have to pay National Insurance on the rental income they earn, many purchases have been put on hold or cancelled.”

Landlords play waiting game

Mr Stimson also says that despite signs that inflationary pressures are easing, mortgage rates have barely moved.

He said: “Mortgage interest rates have been mostly static for the past few months, and even though swap rates have dipped this week following the news that wage inflation has cooled, no-one expects the Bank of England to cut its base rate again until next year.

“With little prospect of interest rates going any lower in the coming weeks, the looming prospect of another tax raid has choked off the market’s recovery and led many would-be landlords to play an uncomfortable waiting game.”

Increased mortgage activity

While buy to let mortgage activity faltered, wider mortgage data showed a more mixed picture.

Lenders report that the overall supply of secured credit available to households rose notably in the three months to the end of August.

They say the rise is down to shifting economic conditions and greater risk appetite, with expectations of increased mortgage activity in the final quarter of the year.

Demand for house purchases remained steady, while appetite for remortgaging slipped slightly.

However, lenders expect a strong rebound by the end of the year, as more borrowers look to secure fixed-rate deals before potential tax or rate changes.

Lenders keen to lend

SPF Private Clients’ chief executive, Mark Harris, said lenders are still open for business.

He added: “Lenders remain keen to lend and have the funds available to do so.

“The past few months have seen them easing affordability criteria, increasing the borrowing potential of many mortgage applicants.

“Demand from borrowers remained unchanged during the third quarter, which is a nod to the resilience of the market and the desire of many buyers and sellers to get on with their moves.”