UK Finance has released its buy-to-let (BTL) mortgage market update for Q3 2025, highlighting a surge in lending and investor activity.
In Q3, there were 59,467 new buy-to-let loans worth £10.9 billion, a 22.7% increase in number and 28.2% rise in value compared with the same period last year. The average gross rental yield across the UK reached 7.15%, up from 6.93% in Q3 2024.
The average interest rate for new BTL loans fell to 4.85% in Q3 2025, down 15 basis points from the previous quarter and 37 basis points from the same quarter last year. This contributed to an increase in the average interest cover ratio (ICR), which rose to 215%, from 195% in Q3 2024 and 210% in the previous quarter.
The structure of outstanding BTL mortgages also shifted. Fixed-rate loans rose by 2.3% to 1.44 million, while variable-rate loans fell by 9.7% to 488,000. Meanwhile, the number of BTL mortgages in arrears above 2.5% of the outstanding balance fell by 850 to 10,420. Mortgage possessions increased to 900 in the quarter, up 28.6% from 700 in Q3 2024.
Louisa Sedgwick, managing director of mortgages at Paragon Bank, said, “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 This continued the trend from the first half of the year, which saw more equity withdrawn at remortgage for portfolio expansion than any other corresponding period since 2018."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 specialist lender MT Finance, says, “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 BTL loans has eased to 4.85 per cent, 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 reveal 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, says: “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.”
