Buy-to-let lending recovered at the start of 2025 as mortgage rates continued to fall, according to the latest data from UK Finance.
In Q1 2025 there were 58,347 new buy-to-let loans advanced in the UK, worth £10.5 billion. This was up 38.6% by number and 46.8% by value compared with the same quarter in 2024.
The average interest rate across all new buy-to-let loans was 4.99% in Q1 - 10 basis points lower than in the previous quarter and 41 basis points lower than in Q1 2024.
Reflecting the downwards movement in interest rates, the average buy-to-let interest cover ratio (ICR) in Q1 was 202%, up from 190% in Q1 2024 and unchanged from the previous quarter.
The number of fixed rate buy-to-let mortgages outstanding in Q1 was 1.44 million, 4.99% up on a year previously. In contrast, the number of variable rate loans outstanding fell by 15.8% to 500,000.
At the end of Q1 there were 11,830 buy-to-let mortgages in arrears greater than 2.5% of the outstanding balance, down 780 from the previous quarter.
However, there were 810 buy-to-let mortgage possessions taken in Q1, up 28.6% on the same quarter a year previously.
Louisa Sedgwick, managing director of mortgages at Paragon Bank, commented: “Buy-to-let lending in the first quarter of the year was the highest seen since the mini-budget and in line with pre-pandemic levels, primarily driven by a surge in new purchase activity ahead of the changes to Stamp Duty thresholds at the end of the quarter.
“This shows that with the right market conditions landlords will invest. Demand currently exceeds supply and is forecast to continue, driven by factors such as population increases and household formation changes. To meet this demand and help to moderate rent inflation, as well as to provide a home to millions of tenants across all walks of life, it is essential to facilitate an attractive investment environment with balanced regulation and economic stability.”
Richard Donnell, executive director at Zoopla, added: "Activity from buy-to-let landlords is starting to increase as mortgage rates stabilise and yields from residential property move higher as rents rise faster than house prices. The big landlord sell off is coming to an end after a decade of tax changes and higher borrowing costs that saw many landlords reconsider their strategy and property holdings. As base rates start to fall, we are likely to see a continued increase in demand from landlords with a greater focus on strength and quality of cashflow rather than house prices inflation."
