Buy-to-let lending rose sharply at the end of 2025, but the growth came largely from landlords refinancing existing debt rather than expanding portfolios, according to the latest UK Finance market update.
UK Finance said 59,489 new buy-to-let loans were advanced in the UK in the fourth quarter, worth £11.2 billion. That was up 18.2 percent by number and 21.3 percent by value from a year earlier. But the body said new purchase demand remained fragile, with the strongest growth concentrated in remortgaging.
For landlords, the figures point to a market still dominated by balance sheet management rather than fresh acquisition. Falling rates in late 2025 helped many borrowers refinance, pushing the average interest rate on new buy-to-let loans down to 4.77 percent, eight basis points lower than the previous quarter and 32 basis points below the same period in 2024.
Remortgaging drives the headline growth
Rental yields also improved. UK Finance said the average gross buy-to-let yield reached 7.18 percent in Q4 2025, up from 6.99 percent a year earlier, while the average interest cover ratio rose to 218 percent from 201 percent. That suggests lower borrowing costs gave some landlords more breathing room on affordability tests, even as purchase appetite stayed subdued.
James Tatch, head of analytics at UK Finance, said the market was resilient overall, but warned that “growth concentrated in remortgage markets” showed demand for buy-to-let purchases remained weak. He added that recent mortgage market instability could limit further refinancing growth and said existing tax and regulatory pressures, alongside the Renters’ Rights Act due next month, were likely to keep weighing on new activity.
Megan Eighteen, president of ARLA Propertymark, struck a similar note in response to the figures, saying the resilience shown in the data was being supported by remortgaging rather than fresh investment. She said strong tenant demand was helping existing landlords, but argued that tax and regulatory changes were still discouraging new entrants.
Louisa Sedgwick, managing director of mortgages at Paragon Bank, said the figures suggested landlord confidence had started to improve by the end of 2025, with both lending volumes and values materially higher than a year earlier. But she also noted that the data pre-dated the latest geopolitical tensions and the renewed pressure on rates and mortgage pricing, which means the stronger quarter should not be read as a clean signal that the market has fully turned.
There were also signs of stress easing in some areas. The number of buy-to-let mortgages more than 2.5 percent in arrears fell by 910 over the quarter to 9,520. However, possessions still rose to 770, up 10 percent from 700 a year earlier, showing that pressure has not disappeared for all borrowers.
Lower arrears do not mean the pressure is over
This follows Landlord Knowledge’s report on Barclays lifting buy-to-let affordability, which highlighted how easing affordability tests were opening up more refinancing headroom. Combined with our recent coverage of BTL lenders cutting rates and widening criteria, the latest UK Finance figures suggest landlords who already hold property are still finding ways to refinance, even if the case for buying more stock remains harder to make.
The main warning for investors is that better lending conditions have not removed the wider policy drag on the sector. UK Finance expects a broadly flat year for buy-to-let purchase lending, and Propertymark said a more balanced policy approach would be needed to encourage new investment and improve rental supply. In practice, that means landlords considering expansion are still weighing higher regulation, tax burdens and uncertain financing costs against stronger yields.
What this means for landlords
- If you’re remortgaging: improved rates and stronger interest cover ratios may make refinancing easier than it was a year ago, but lenders are still repricing quickly.
- Watch for: purchase lending staying flat even as remortgage activity rises, which points to caution across the sector rather than a broad recovery.
- Bottom line: existing landlords may have more room to tidy up finance, but the figures do not yet show a convincing return of confidence in buying more property.
Editor’s view
The headline growth looks encouraging, but landlords should read past the first number. This was a refinancing quarter, not a buying boom. Better yields and lower arrears help, but the market still looks defensive ahead of another major regulatory change.
Author: Editorial Team – UK landlord & buy-to-let news, policy, and finance
Published: 16 April 2026
Sources: UK Finance, Propertymark, Paragon Bank
Related reading: Barclays lifts BTL affordability as landlords gain £20,000 headroom
