Buy to Let Lending Growth in Q3 2025

New data from UK Finance shows a sharp rise in buy to let lending across the UK during the third quarter of 2025. A total of 59,467 loans were completed, amounting to £10.9 billion in lending value. This represents a 22.7% increase in loan volume and a 28.2% increase in value compared with the same quarter in 2024.

The rebound in lending activity suggests improving market confidence among landlords and investors, supported by easing borrowing costs and rising rental yields. The typical interest rate on new buy to let mortgages fell to 4.85%, down 15 basis points from the previous quarter and 37 basis points from a year earlier.

Mortgage Arrears and Possessions

While mortgage arrears continue to decline, with 10,420 buy to let mortgages more than 2.5% in arrears at the end of September—a quarterly reduction of 850 cases—there was a notable rise in lender possessions. During the quarter, 900 buy to let properties were repossessed, a 28.6% increase from 700 in Q3 2024.

This increase in possessions serves as a reminder that affordability pressures remain for some landlords, particularly those facing higher borrowing and operating costs.

Rental Yields and Interest Cover Ratios

Average gross rental yields rose to 7.15% in Q3 2025, up from 6.93% a year earlier, reflecting stronger rental income relative to property values. Meanwhile, the average interest cover ratio (ICR)—which measures rental income against mortgage interest payments—increased to 215%, compared with 195% in Q3 2024 and 210% in the previous quarter.

Howard Levy, director of mortgage broker SPF Private Clients, commented: “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.”

Mortgage Market Composition

The number of outstanding fixed-rate buy to let mortgages increased by 2.3% annually to 1.44 million, while variable-rate loans declined by 9.7% to 488,000. This shift suggests landlords are favouring the security of fixed rates amid ongoing economic uncertainty.

Industry Perspectives on Market Trends

Megan Eighteen, president of ARLA Propertymark, noted: “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, highlighted the market’s strategic adjustments: “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.”

Louisa Sedgwick, managing director of mortgages at Paragon Bank, pointed to strong remortgage activity: “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.”

What This Means for Landlords

The data indicates a cautiously optimistic environment for UK landlords, with lending conditions improving and rental yields rising. However, the increase in possessions signals that some landlords are still under financial strain, likely due to higher borrowing costs and operational expenses. Landlords should carefully assess their mortgage arrangements and rental income to ensure sustainable portfolios, especially as regulatory changes approach.