Buy-to-let lending rose sharply at the end of 2025, driven largely by a surge in remortgaging activity according to the latest data from UK Finance.
A total of 59,489 new buy-to-let loans were advanced in Q4 2025, worth £11.2bn, marking an increase of 18.2% by volume and 21.3% by value compared with the same period a year earlier.
The growth was concentrated in refinancing rather than new purchases, pointing to continued caution among landlords entering the market.
Average rental yields also increased, reaching 7.18% in Q4 2025, up from 6.99% a year earlier, while average interest rates on new loans fell to 4.77%.
FALLING ARREARS
The number of fixed-rate buy-to-let mortgages rose by 2% year-on-year to 1.46 million, while variable rate loans continued to decline, falling 9.8% to 466,000.
Arrears fell over the quarter, with 9,520 loans in arrears of more than 2.5% of the outstanding balance, although possessions increased slightly year-on-year to 770 cases.
James Tatch, Head of Analytics at UK Finance, says: “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.
“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 Bill, which will come into force next month, 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.”
FRAGILE MARKET
Megan Eighteen (main picture, inset), President of ARLA Propertymark (Association of Residential Letting Agents), says: “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.
“However, tax and regulatory changes, alongside the Renters’ Rights Act, which is soon to commence in England, continue to limit new entrants.
“A more balanced approach that supports both tenants and responsible landlords would help encourage investment and improve supply, easing upward pressure on rents over time.”
