Demand in the buy-to-let market has been largely fuelled by re-mortgaging, with new purchases falling slightly in Q4 of 2025 compared to the same period a year ago, newly released figures from UK Finance reveal.
There were 59,489 new buy-to-let loans advanced in the UK, worth a total of £11.2 billion and up 18.2% on the previous year. But James Tatch, head of analytics at UK Finance, warns demand for new purchases is fragile.
He said: “Investors took advantage of falling interest rates to refinance their borrowing, although instability in the mortgage market in recent weeks has pushed up borrowing costs, which may well dampen the growth BTL remortgaging somewhat.
“However, a combination of the regulatory and tax measures already in place, combined with the measures in the Renters’ Rights Bill, which will come into force next month, are likely to continue to weigh down on new demand activity. We expect a broadly flat picture for BTL purchase lending this year, compared to levels seen a year ago.”
Rachel Springall, finance expert at Moneyfacts, agrees the data suggests “tough times are ahead for landlords”.
“Repossessions of buy-to-let properties are up by 10% year-on-year, and it is worrying to think that landlords could be failing to keep up with mortgage repayments,” she said.
“In the months ahead, the cost of living is predicted to worsen, and this will be magnified if landlords are due to come off a cheap fixed rate, because mortgage rates have been rising.
“Typically, landlords would spend time building up a decent-sized property portfolio to receive a good return on their investment over the years. However, if they do not have dependable tenants to cover mortgage costs, a property portfolio can turn into a huge financial burden.“During Q4 2025, the average gross buy-to-let rental yield rose to 7.18%, up from 6.99% in the same quarter a year earlier.
“The rush to remortgage was prevalent during Q4 2025, with a 28% year-on-year rise in remortgages for new buy-to-let loans, plus there was a 27.5% yearly rise in buy-to-let product transfers.
“The average buy-to-let interest cover ratio increased to 218% in Q4 2025, versus 201% a year earlier and 215% in the previous quarter.
“Rising costs this year could lead to higher rental payments for tenants, or a drop in the pool of properties available for rent if landlords decide to sell up.”
However, according to Raheel Butt, head of buy-to-let underwriting at specialist lender MT Finance, the market is maturing with new entrants.
He explained: “Ultimately, Q4’s performance confirms that the barrier to entry has evolved. New entrants are now by-passers of the low-rate lure of the past, instead entering the market with a sophisticated focus on strategic capital gains and long-term portfolio growth. Buy-to-let is not just continuing; it is maturing into a more disciplined, professional and institutionalised sector.”