Buy-to-let lending fell sharply in the third quarter of 2025, as landlords paused purchases amid renewed fears of tax rises in next month’s Autumn Budget, according to new data from the Bank of England.
The figures show a 12.5% drop in buy-to-let loans agreed between June and August, reversing three consecutive quarters of growth in the sector.
Professional landlords keeping market alive
While small-scale landlords continue to exit the sector, professional investors remain active — though even they are now treading cautiously. Peter Stimson, Director of Mortgages at MPowered Mortgages, said the market “ground to a halt a year ago” and has been kept afloat by seasoned landlords rather than casual investors.
“After three successive quarters of rising demand for buy-to-let mortgages, things slammed into reverse during the third quarter of 2025,” he explained. “The number of loans agreed dropped by 12.5% compared to the previous quarter, and the sector’s anxiety about potential tax increases in next month’s Budget is a key factor in the slowdown.”
This marks the first quarterly contraction since late 2023 and suggests landlords are waiting for clarity on fiscal policy before committing to new deals or refinancing.
Tax uncertainty stalls buy-to-let recovery
Successive governments have already stripped landlords of key tax advantages — including mortgage interest relief and the Stamp Duty surcharge on second homes — and rumours of further hikes have unsettled investors.
“Successive Chancellors have painted a target on the backs of buy-to-let owners,” Stimson said, adding that talk of National Insurance being levied on rental income has led many landlords to delay or cancel purchases.
Despite stable mortgage rates and a slight dip in swap rates following cooler wage inflation data, there is little confidence that the Bank of England will cut its base rate again before 2026. That means landlords hoping for cheaper borrowing costs are instead facing a nervous waiting game — balancing steady tenant demand with higher operational costs and tightening lending criteria.
Industry analysts agree that this period of hesitation could weigh on rental supply later in the year. If fewer landlords buy or refinance, fewer homes will remain in the private rented sector — a risk the government can ill afford given record tenant demand.
What landlords should do next
For existing landlords, the pause in new lending offers both challenges and opportunities. Mortgage brokers suggest reviewing fixed-rate end dates early and locking in favourable remortgage terms before potential post-Budget repricing.
Portfolio landlords may also benefit from restructuring under limited company ownership, which can offer greater tax efficiency if further individual levies are introduced. However, this should be weighed against incorporation costs and the current 5% Stamp Duty surcharge.
“With little prospect of interest rates going any lower in the coming weeks, the looming prospect of another tax raid has choked off the market’s recovery and led many would-be landlords to play an uncomfortable waiting game,” Stimson concluded.
Editor’s view
The sharp fall in buy-to-let mortgage lending is not simply a reflection of market weakness — it’s a reaction to policy uncertainty. Landlords are responding rationally to signals from Westminster: unpredictable taxation, shifting regulations, and mixed messaging on rental reform.
If the Chancellor delivers stability and resists another fiscal squeeze on landlords, confidence could rebound swiftly. But continued hostility toward private investors risks deepening the housing shortage and prolonging the stagnation now evident in lending data.
The next Budget will reveal whether government policy intends to partner with landlords — or punish them further.
Author: Editorial team — UK landlord & buy-to-let news, policy, and finance.
Published: 20 October 2025
Sources: Bank of England Credit Conditions Survey Q3 2025, MPowered Mortgages, ONS wage data
Related reading: Barclays boosts buy-to-let and mortgage lending with new policy changes
