Buy-to-let activity in the UK has staged a notable comeback in early 2025, with new figures revealing a 38.6% jump in buy-to-let loans in the first quarter compared to the same period last year. According to UK Finance, a total of 58,347 new BTL loans worth £10.5 billion were advanced in Q1 — the strongest performance since the ill-fated mini-budget of 2022 and a clear sign that landlord confidence is returning.
The recovery has been fuelled by improving mortgage rates, steady rental yields, and growing rental demand in a market where supply still lags. For many landlords, the numbers confirm what’s long been expected: the so-called ‘landlord exodus’ is levelling off, and opportunities in the rental sector are once again worth pursuing.
“Activity from buy-to-let landlords is starting to increase as mortgage rates stabilise and yields from residential property move higher,” said Richard Donnell, Executive Director at Zoopla. “The big landlord sell off is coming to an end after a decade of tax changes and higher borrowing costs.”
Lower rates boost affordability and cashflow confidence
One key factor in the renewed interest is the drop in buy to let mortgage interest rates. The average rate across all new BTL loans was 4.99% in Q1 2025, down 10 basis points from the previous quarter and 41 basis points lower than Q1 2024. That’s helped boost the average interest cover ratio (ICR) — a key affordability metric — to 202%, up from 190% a year earlier.
This improvement in cashflow is giving landlords more confidence to invest, particularly as rents continue to rise faster than house prices. The UK’s average gross BTL rental yield rose to 6.94% in Q1, a modest increase from 6.88% a year prior, but a reassuring signal of stability for investors.
“Buy-to-let lending in the first quarter of the year was the highest seen since the mini-budget,” said Louisa Sedgwick, Managing Director of Mortgages at Paragon Bank, “and in line with pre-pandemic levels, primarily driven by a surge in new purchase activity ahead of the changes to Stamp Duty thresholds at the end of the quarter.”
Supply gap drives demand despite lingering pressures
While the market is showing clear signs of strength, challenges remain. The number of BTL mortgage possessions rose to 810 in Q1, up 28.6% on the previous year — evidence that affordability concerns still linger for some investors who bought during peak borrowing costs.
That said, arrears have fallen, with 11,830 BTL mortgages in arrears of more than 2.5% of the balance at the end of Q1 — down 780 compared to the previous quarter. And more landlords are locking into fixed rates: the number of fixed-rate BTL loans outstanding reached 1.44 million, up 4.99% year-on-year, while variable-rate loans fell sharply by 15.8% to 500,000.
“It is positive to witness what we hope is a wider scale revival in buy-to-let lending across Q1 of 2025,” said Nathan Emerson, CEO at Propertymark. “These numbers demonstrate that more competitive interest rates are helping to attract more people to the buy-to-let market.”
Emerson cautioned that affordability will remain a key theme throughout the year, with the Bank of England’s base rate decisions playing a critical role in shaping sentiment.
Landlords ready to invest — if government gets the balance right
With net rental demand still outpacing supply and the number of UK households continuing to rise, many in the sector are calling on the government to support — not punish — landlords through this recovery phase. A stable regulatory and fiscal environment, they argue, is essential to maintaining momentum and keeping rents affordable for tenants.
“Demand currently exceeds supply and is forecast to continue,” said Sedgwick. “To meet this demand and help to moderate rent inflation… it is essential to facilitate an attractive investment environment with balanced regulation and economic stability.”
For landlords who weathered the past few turbulent years, the message is clear: conditions are shifting back in their favour. But as ever, the real test will be whether ministers support the market long enough for growth to be sustainable — or let short-term politics once again drive away long-term investment.
UK Finance’s Buy-to-let Mortgage Market Update – Q1 2025 was released today.
