The UK’s buy-to-let sector showed early signs of stabilisation in the second quarter of 2025, with lending activity holding firm and rental yields improving despite continued economic uncertainty.
According to the latest figures from UK Finance, lenders advanced 49,590 new buy-to-let loans between April and June, worth £8.8 billion.
That represented a modest annual fall of 2.6% by number and 0.2% by value – a signal that the market may be finding its footing after a volatile two years.
Average gross rental yields rose to 7.26 %, up from 6.9% in the same period last year, while the average interest rate on new buy-to-let borrowing edged up to 5%.
FINANCIAL RESILIENCE
Landlords’ financial resilience also improved: the average interest cover ratio increased to 210%, from 192% a year earlier, helped by lower funding costs following a series of Bank of England rate cuts.
More landlords are opting for fixed-rate loans to lock in stability, with the number of such mortgages rising 5.5% year on year to 1.47 million.
Arrears declined for the first time this year, with 11,270 buy-to-let loans more than 2.5% in arrears at the end of June – 560 fewer than in the previous quarter. However, possessions increased to 790, up 11.3% year on year.
UNEVEN RECOVERY
Megan Eighteen, president of ARLA Propertymark, says the data reflects “mixed results” for landlords navigating an uneven recovery.
She adds: “Inflation remains stubbornly high, interest rates are still elevated compared to pre-pandemic levels, and Stamp Duty thresholds are less favourable than in the same period last year.
“Combined with the anticipation surrounding the upcoming Autumn Budget, many investors are choosing to hold off on decisions until there is greater clarity.”
IMPROVED RENTAL YIELDS
And she says: “Some areas of the country are seeing improved rental yields compared to this time last year, and the number of buy-to-let mortgages in arrears has declined since the previous quarter.
“We hope to see economic conditions stabilise in the near future to support a stronger and more confident buy-to-let sector.”
