Arrears and possessions fall, but house purchase lending slips on the quarter
Buy-to-let (BTL) lending rose 20.6% by number in the second quarter of 2026 compared with a year earlier. UK Finance cautioned that the headline growth overstates the market’s momentum.
Lenders issued 58,051 new BTL loans worth £10.7 billion between April and June, according to UK Finance’s BTL update, published Wednesday. The total value rose 25% year on year.
Of the total, 39,631 were remortgages. That is up 17.6% by number and 20.2% by value on Q2 2025. Remortgages were 470 loans higher than in Q1 2026.
Loans for house purchase totalled 16,026, up 23% by number and 27.9% by value year on year. On the quarter, however, new purchase lending fell by 845 loans.
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UK Finance said the annual jump largely reflects stamp duty changes in Q1 2025, which suppressed lending in the same period last year. High numbers of expiring fixed-rate loans also boosted remortgaging.
“The latest figures point to a more resilient buy-to-let market, but the headline growth should be viewed in context,” James Tatch, head of analytics at UK Finance, said. “Activity in the same period last year was artificially low, as borrowers brought forward loans ahead of stamp duty changes, making the year-on-year increases look particularly strong. Compared with Q1 this year, the market appears more stable, with remortgaging edging up while lending for new purchases eased slightly. Looking ahead, higher borrowing costs are likely weighing down on buy-to-let demand, underpinning flatter lending growth across 2026.”
Rates up on the quarter, arrears down
The average interest rate on new BTL loans was 4.82%. That was 12 basis points higher than in the previous quarter but 18 basis points lower than in Q2 2025. The Bank of England has held Bank Rate at 3.75% since December 2025. Its next decision is due on 5 November.
The average gross rental yield was 7.27%, almost unchanged from 7.26% a year earlier. The average interest cover ratio was 217%, up from 210% in Q2 2025 and lower than in the previous quarter.
Credit performance improved. At the end of June, 8,390 BTL mortgages were in arrears of more than 2.5% of the outstanding balance. That is 570 fewer than in the previous quarter and 25.6% lower than a year earlier. There were 630 possessions, down 20.3% on Q2 2025.
The number of fixed-rate BTL mortgages outstanding was 1.46 million, down 0.7% year on year. Variable-rate loans fell 3% to 450,000.
Lenders warn on rental supply
Louisa Sedgwick, managing director of mortgages at Paragon Bank, said remortgaging “continues to be the story of 2026”. She expects it to remain so as older fixed deals end. “We expect that trend to continue throughout the rest of this year and into 2027 as five-year loans written during the buoyant market of 2021 and 2022 mature,” she said.
She added that lending has been “fairly robust considering the impact of the Iran War on mortgaging pricing”. House purchase loans were in line with the quarterly average since 2024, when the market began recovering after the mini-Budget.
Sedgwick warned about long-term supply: “The number of new purchases today is running approximately 5,000 below the average run rate per quarter since 2013, however, and I suspect new stock entering the market is not keeping pace with exits.
“That creates long-term challenges for tenants through diminished choice and inflated rents, so policymakers need to be mindful of this growing imbalance between supply and demand as it considers next steps for housing policy.”
Kim Lidbury, president of ARLA Propertymark, said the rise in BTL mortgage products being taken up was “extremely encouraging” after a challenging year for the private rented sector.
“Overall, progress has been influenced by ongoing economic pressures and an evolving regulatory environment,” said Lidbury.
“Landlords have faced continued uncertainty around the cost of borrowing, affordability and the wider financial commitments associated with property investment. The implications of legislation such as the Renters’ Rights Act in England and the Housing (Scotland) Act have also added further complexity for those operating within the lettings sector.”
The Renters’ Rights Act came into force in England on 1 May and abolished Section 21 “no-fault” evictions.
Lidbury added: “Maintaining access to competitive finance will be crucial in supporting responsible investment, helping existing landlords navigate the changing landscape and encouraging continued investment in the homes needed by tenants across the entire UK.”
