The UK’s Buy-to-Let mortgage market saw a significant uptick in activity during the first three months of 2025, driven by falling interest rates and resilient rental yields.
The number of Buy to Let mortgages advanced in the first three months of the year jumped to 58,347 according to banking trade body UK Finance, up 38.6% compared with the same period last year.
The combined value of these mortgages was £10.5 billion, up 46.8% compared to last year.
There were 1.44m Buy-to-Let mortgages outstanding at the end of March, with landlords seemingly undeterred by tax and regulatory changes for investors in recent years. This is likely to be due to easing mortgage rates and strong yields from residential property.
Rates dip below 5%
The average interest rate on new Buy-to-Let mortgages stood at 4.99% between January and March 2025, UK Finance said. This is down 10 basis points from the previous quarter and 41 basis points lower than in the same period last year.
Meanwhile, the average gross rental yield across the UK rose marginally to 6.94% in the first three months of the year, up from 6.88% a year earlier, suggesting stable returns for landlords.
Fixed rates gain favour
Given the current uncertain economic environment, growing numbers of landlords are opting for the security of fixed rate mortgage deals, which can provide valuable budgeting certainty.
There were 1.44 million buy-to-let loans locked in at fixed rates between January and March, a 4.99% increase compared to the previous year. In contrast, variable-rate loans saw a sharp decline, dropping by 15.8% to just 500,000, as landlords looked to protect themselves from interest rate volatility.
Landlords are also benefiting from strong tenant demand, which means that several tenants are often competing for one property.
A spokesman for property website Zoopla said: “The reality is that rental supply remains 20% below pre-pandemic levels. While the pace of rent increases has slowed, renters still face strong competition for rented homes, especially those on lower incomes with little hope of being able to buy a home.”
