BTL lending surged in the third quarter of 2025 with 22.7% more loans written than the year before.
The latest UK Finance BTL lending figures have revealed that 59,467 loans were advanced in that period, with these worth a combined £10.9bn.
Rental yields also increased in the third quarter. At that point, the average BTL rental yield was 7.15% compared to 6.93% the year before.
Conversely, the average interest rate on new BTL loans dropped.
In the third quarter, this was 4.85% and 15bps lower than the previous quarter or 37bps lower than the same point in 2024.
The industry has responded positively to this data, and Marylen Edwards — director of mortgages at MT Finance — sees this as a “compelling snapshot” of the market.
“While the industry prepares for the Renters’ Rights Bill changes which start to come into force from May, professional landlords aren't just surviving, they are recalibrating,” said Marylen.
“Despite the headwinds of 2025’s rate environment, it’s clear the sector is still actively transacting and business continues to grow.
“The Q3 data reveals a definitive flight to quality, where equity-rich, professional investors are capitalising to strengthen and diversify their portfolios.”
In particular, Louisa Sedgwick, managing director of mortgages at Paragon Bank, pointed to the confidence taken from remortgage activity.
UK Finance data shows £7.7bn of loans written during this period were for remortgages, up 37.4% from the year before.
“This continued the trend from the first half of the year, which saw more equity withdrawn at remortgage for portfolio expansion than any other corresponding period since 2018,” said Louisa.
“Viewed in the context of the latest encouraging figures, and with rates forecast to continue to fall, we anticipate the momentum seen in both the purchase and remortgage markets to continue throughout 2026.”
However, there was some caution about reading too much into the data given the significant changes still filtering through in the PRS.
“Looking at any specific quarter is slightly misleading as the various changes that occurred in 2024 with taxation, relief and the SDLT surcharge increase delivered in the October Budget of 2024 could have skewed the figures that quarter,” said Howard Levy, director of mortgage broker SPF Private Clients who instead saw ICR coverage of 215% as more interesting.
“This would potentially mean that rates were booked and fixed at a low point, that LTVs are low on average or rents have risen drastically.
“In reality, it is probably a combination of all of these, but if rents continue to rise to cover the extra costs that the government is requiring landlords to pay, then we can expect this figure to rise even further.”
