UK Finance has issued its latest buy-to-let mortgage market update for Q3 2025. The data shows there were 59,467 new buy-to-let loans advanced in the UK over the quarter, worth £10.9 billion. This was up quite significantly compared with the same quarter in the previous year - 22.7% by number and 28.2% by value.
The average gross buy-to-let rental yield for the UK in Q3 2025 was 7.15%, compared with 6.93% in the same quarter in the previous year.
The average interest rate across all new buy-to-let loans in the UK was 4.85% in Q3, 15 basis points lower than in the previous quarter and 37 basis points lower than in the same quarter of 2024.
Reflecting the downwards movement in interest rates, the average buy-to-let interest cover ratio (ICR) for the UK in Q3 2025 was 215%, up from 195% in Q3 2024 and 210 in the previous quarter.
The number of buy-to-let fixed rate mortgages outstanding in Q3 2025 was 1.44 million, 2.3% up on a year previously. In contrast, the number of variable rate loans outstanding fell by 9.7% to 488,000.
Arrears and repossessions
At the end of Q3 there were 10,420 buy-to-let mortgages in arrears greater than 2.5% of the outstanding balance. This was down 850 from the previous quarter.
However, there were 900 buy-to-let mortgage possessions taken in Q3 2025, up 28.6% from 700 in the same quarter a year previously.
Louisa Sedgwick, managing director of mortgages at Paragon Bank, commented: “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 This continued the trend from the first half of the year, which saw more equity withdrawn at remortgage for portfolio expansion than any other corresponding period since 2018. Viewed in the context of the latest encouraging figures, and with rates forecast to continue to fall, we anticipate the momentum seen in both the purchase and remortgage markets to continue throughout 2026.”
Marylen Edwards, director of mortgages at MT Finance, said: “This data provides a compelling snapshot of a market in strategic transition. While the industry prepares for the Renters’ Rights Bill 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 buy-to-let loans has eased to 4.85%, down 37 basis points from a year ago. This softening is pushing the recalibration of portfolios as landlords lock in stability before the May 1st deadline.
“Despite the headwinds of 2025’s rate environment, it is clear the sector is still actively transacting and business continues to grow. The Q3 data reveals a definitive flight to quality, where equity-rich, professional investors are capitalising to strengthen and diversify their portfolios. New landlords coming into the market are looking at longer-term strategic capital gains and the ability to uplift and grow a portfolio.”
Howard Levy, director of mortgage broker SPF Private Clients, added: “Many smaller portfolio landlords who held in their own name have left the market which has paved the way for the larger buy-to-let investors to provide the stock for this still rising demand.
“Looking at any specific quarter is slightly misleading as the various changes that occurred in 2024 with taxation, relief and the SDLT surcharge increase delivered in the October Budget of 2024 could have skewed the figures that quarter. It will be interesting to see if the number of loans advanced reverts back next quarter as compared to Q1 2025.
“For me the most interesting point is that the ICR coverage was 215%. 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.”
