Improving rental yields and lower borrowing costs helped support the buy-to-let market during the first quarter of 2026, with new lending increasing despite continued regulatory and tax pressures on landlords.
Latest figures from UK Finance show 58,272 new buy-to-let loans were advanced during the quarter, worth £10.8bn. That was 3.3% higher by volume and 7% higher by value than in the first three months of 2025.
The average gross rental yield climbed to 7.21%, up from 6.93% a year earlier, while the average interest rate on new buy-to-let mortgages fell to 4.71%, down from 5% in the same quarter last year.
The combination of rising rental income and lower borrowing costs improved landlords’ affordability, with the average interest cover ratio increasing to 221% from 204% a year earlier.
PRS OPPORTUNITIES
The figures suggest many landlords continue to find opportunities within the private rented sector despite a challenging operating environment, with higher rents helping to offset increased costs.
UK Finance’s data also highlighted the continued preference for payment certainty, with the number of outstanding fixed-rate buy-to-let mortgages increasing by 1.4% year-on-year to 1.47 million. Meanwhile, the number of variable-rate loans fell by 9.5% to 453,000.
There were further signs of improving financial resilience among landlords, with buy-to-let mortgage arrears falling during the quarter. At the end of March there were 8,960 mortgages in arrears of more than 2.5% of the outstanding balance, 560 fewer than at the end of the previous quarter.
The number of buy-to-let properties taken into possession remained unchanged year-on-year at 810.
The latest figures come as the private rented sector continues to adapt to significant legislative reform, including the Renters’ Rights Act, while demand for rental accommodation remains strong in many parts of the country.
RENTERS’ RIGHTS ACT
Mark Harris, CEO of broker SPF Private Clients, says: “Although the implementation of the Renters’ Rights Act was imminent during the period this data covers, it doesn’t seem to have deterred landlords.
“An increase in new buy-to-let loans advanced in the first quarter of the year, up compared with the same period the previous year, points to investors who still recognise opportunities in the market.
“Perhaps the uptick in average yields explains that – investing in rental property is still working for many landlords and experienced ones in particular are expanding their portfolios where opportunities arise.
“With the number of landlords in arrears falling and possessions unchanged, the outlook for the sector is brighter than one might think given that the regulatory and tax burden on investors is increasing. The sector is becoming more professional and with more landlords incorporating in order to maximise returns, there are plenty of opportunities out there.
“However, now is not the time for further interference from government – the sector needs time to settle and get to grips with recent legislative changes.”
RESILIENT SECTOR
Raheel Butt, Head of BTL Underwriting at specialist lender MT Finance, says: “The latest Q1 data from UK Finance shows an incredibly resilient buy-to-let sector.
“With figures showing a total lending volume of £10.8 billion across more than 58,000 loans, this proves that property investment remains a highly attractive, core asset class.
“What we are seeing is a strategic restructuring of the market. The 11.1% surge in remortgaging activity highlights a proactive landlord community.
“Savvy investors are taking control and optimising their existing portfolios. While high borrowing costs and preparation for the Renters’ Rights Act naturally caused a temporary dip in new house purchases, the fundamental demand for quality rental housing across the UK is stronger than ever.
“Crucially, the 6% quarter-on-quarter drop in mortgages in arrears, bringing the total down to just 0.47% of the market, is a fantastic indicator of stability. It shows that professional landlords are managing their leverage exceptionally well. It also underscores the value of robust, common-sense underwriting.”
