“While the figures predate the latest rise in geopolitical tensions and the resulting pressure on rates and mortgage pricing, they still point to underlying resilience in the sector.”
– Louisa Sedgwick – Paragon Bank
Buy-to-let lending grew sharply in Q4 2025, with 59,489 new loans advanced in the UK worth £11.2 billion, according to UK Finance data. That represents an 18.2% increase by number and 21.3% by value compared with the same quarter in 2024, with remortgage activity accounting for much of the growth.
Yields improved over the period, with the average gross buy-to-let rental yield rising to 7.18% in Q4 2025 from 6.99% a year earlier.
Falling borrowing costs supported the improvement, as the average interest rate across all new buy-to-let loans dropped to 4.77%, down 8 basis points on the previous quarter and 32 basis points below Q4 2024.
The interest cover ratio (ICR), which measures rental income against mortgage costs, strengthened as a result, rising to 218% from 201% in Q4 2024 and 215% in the preceding quarter.
Fixed-rate products continued to dominate the outstanding book, with 1.46 million fixed-rate buy-to-let mortgages recorded at the end of the quarter, up 2% year on year. Variable rate loans, by contrast, fell a further 9.8% to 466,000.
Arrears also eased, with 9,520 buy-to-let mortgages in arrears greater than 2.5% of the outstanding balance at the end of Q4, down 910 from the previous quarter. Possessions, however, ticked higher, with 770 recorded in Q4 2025, up 10% from 700 in the same quarter a year earlier.
“UK Finance’s Q4 2025 figures indicate that landlord confidence was beginning to improve towards the end of last year,” said Louisa Sedgwick, managing director of mortgages at Paragon Bank. “The data shows a clear pickup in activity, with both lending volumes and values up materially on the same quarter in the previous year.”
“While the figures predate the latest rise in geopolitical tensions and the resulting pressure on rates and mortgage pricing, they still point to underlying resilience in the sector. Where conditions are stable, and returns remain viable, landlords continue to invest against a backdrop of sustained demand for rented homes and limited supply.”
“This data provides a definitive conclusion to a year defined by professional resilience,” said Raheel Butt, head of underwriting, BTL, at specialist lender MT Finance. “The final quarter saw the momentum of the year-on-year surge in lending value reach its peak. This activity was fuelled by a continued easing of borrowing costs.”
“Ultimately, Q4’s performance confirms that the barrier to entry has evolved. New entrants are now bypassers of the low-rate lure of the past, instead entering the market with a sophisticated focus on strategic capital gains and long-term portfolio growth. Buy-to-let is not just continuing; it is maturing into a more disciplined, professional and institutionalised sector.”
Megan Eighteen, President of ARLA Propertymark (Association of Residential Letting Agents), comments, “Latest figures from UK Finance show buy-to-let resilience, but this is largely driven by remortgaging rather than new investment, highlighting continued fragility in purchase activity.”
“Strong tenant demand continues to underpin the sector, providing some stability for existing landlords, although wider economic uncertainty, including global events, may influence borrowing costs in the months ahead. However, tax and regulatory changes, alongside the Renters’ Rights Act, which is soon to commence in England, continue to limit new entrants.”
“A more balanced approach that supports both tenants and responsible landlords would help encourage investment and improve supply, easing upward pressure on rents over time.”