Remortgage volumes rise and yields improve, but buyer appetite remains subdued
Buy-to-let lending increased in the final quarter of 2025, with remortgaging accounting for most of the uplift, according to the latest market update by UK Finance.
In Q4 2025, lenders advanced 59,489 new BTL loans, with total lending of £11.2 billion. That represented an 18.2% rise by volume and a 21.3% increase by value compared with the same period a year earlier.
Value of new BTL lending 
Source: UK Finance
The data points to a shift in product mix. UK Finance said the number of fixed-rate BTL mortgages outstanding reached 1.46 million, up 2% year-on-year. Over the same period, variable-rate balances continued to fall, down 9.8% to 466,000.
Pricing and affordability metrics moved in borrowers’ favour during the quarter. The average interest rate across new BTL loans was 4.77%, down eight basis points from Q3 2025 and 32 basis points lower than Q4 2024. In parallel, the average interest cover ratio (ICR) rose to 218%, compared with 201% a year earlier and 215% in the previous quarter.
Rental yields also strengthened. The average gross BTL rental yield across the UK was 7.18% in Q4 2025, up from 6.99% in Q4 2024.
Arrears eased on a quarterly basis, though possessions were higher than a year earlier. At the end of Q4 2025, there were 9,520 BTL mortgages in arrears of more than 2.5% of the outstanding balance, down 910 compared with the prior quarter. Possessions totalled 770 in the quarter, up from 700 in Q4 2024.
“The buy-to-let market overall was resilient at the end of last year, with the number of loans advanced around a fifth higher than at the same time the previous year.” said James Tatch (pictured right), head of analytics at UK Finance. “But, with growth concentrated in remortgage markets, new demand for BTL purchase remains fragile, falling slightly in Q4 compared with the same quarter a year ago.”
According to Tatch, investors used lower interest rates towards the end of last year to refinance. However, he said that instability in the mortgage market in recent weeks has increased borrowing costs, which could curb growth in buy-to-let remortgaging.
“A combination of the regulatory and tax measures already in place, combined with the measures in the Renters’ Rights Bill, which will come into force next month, are likely to continue to weigh down on new demand activity. We expect a broadly flat picture for BTL purchase lending this year, compared to levels seen a year ago.”
For Louisa Sedgwick, managing director of mortgages at Paragon Bank, although the figures pre-date 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,” she said.
“Ultimately, Q4’s performance confirms that the barrier to entry has evolved,” added Raheel Butt, head of underwriting for buy-to-let at MT Finance. “New entrants are now by-passers 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.”
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