Arrears in the buy to let sector have dipped, but repossessions are on the rise, according to the latest figures from UK Finance.
At the end of the second quarter of 2025, 11,270 BTL mortgages were in arrears of more than 2.5% of the outstanding balance.
That’s a drop of 560 cases from the previous quarter.
However, there were 790 buy to let mortgage possessions recorded in Q2, which is an 11.3% rise compared with the same quarter in 2024.
Fewer BTL loans being advanced
UK Finance says that overall lending activity has remained broadly stable and between April and June 2025, 49,590 new BTL loans were advanced.
They were worth £8.8 billion which is almost unchanged from the same period last year, down by 2.6% by number and 0.2% by value.
Average rental yields continued to climb, reaching 7.26% in Q2, compared with 6.9% last year.
The average interest rate on new BTL loans is 5%, up by two basis points from the previous quarter but 19 basis points lower than in Q2 2024.
Falling rates are helping improve affordability, with the average interest cover ratio rising to 210% from 192% a year earlier.
That’s slightly above the 201% recorded in Q1 2025.
The number of outstanding fixed rate BTL mortgages rose 5.5% year-on-year to 1.47 million, while variable rate loans dropped by 18% to 463,000.
Property sector reaction
Louisa Sedgwick, the managing director of mortgages at Paragon Bank, said: “Although mortgage completions were lower than the first quarter of the year and when compared to the same period in 2024, they must be viewed in the context of the market distortion brought about by changes to Stamp Duty at the end of March.
“Landlords brought forward transactions to benefit from the higher Stamp Duty thresholds and lower their tax exposure.
“More broadly, it’s also interesting to note an uplift in the value of outstanding balances. These have been increasing since the second half of last year and now sit above £300 billion, something not seen since the second quarter of 2023.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Despite reports of an exodus of landlords amid concerns about the imminent Renters’ Reform Bill, the buy to let market does not appear to be faring too badly, as mortgage rates continue to fall and rents increase.
“Not only have buy-to-let mortgage rates reduced throughout the year, but lenders have also been improving their criteria. Those landlords borrowing via a limited company are also benefiting from a wider choice of products and falling mortgage rates, although these are still pegged higher than for landlords buying in their own name.”
He added: “The buy to let market is undoubtedly heading towards professional landlords predominantly running the private rented sector and whether to incorporate or not is one of the big questions facing landlords.”
Megan Eighteen, the president of ARLA Propertymark, said: “These mixed results highlight the ongoing uncertainty facing the buy to let market, driven by wider economic pressures.
“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.”