Buy-to-let mortgage lending rebounded strongly in Q3 2025 with investors returning to the market amid falling interest rates and higher rental yields, according to UK Finance.
And that bounce back could throw up a whole host of opportunities for bridging and short-term finance providers where investors are seeking fast access to capital in a market where fixed-rate products dominate.
Some 59,467 new BTL loans were advanced between July and September, worth £10.9bn, up 22.7% by number and 28.2% by value compared with the same period in 2024.
The recovery was underpinned by improving returns. The average gross rental yield across the UK rose to 7.15%, up from 6.93% a year earlier, while borrowing costs eased. The average interest rate on new BTL loans fell to 4.85%, down 15 basis points on the previous quarter and 37 basis points lower than Q3 2024, boosting affordability.
The average interest cover ratio rose to 215%.
The average interest cover ratio rose to 215%, compared with 195% a year earlier, giving landlords greater headroom.
Landlord certainty also strengthened. Fixed-rate BTL mortgages outstanding increased 2.3% to 1.44 million, while variable-rate loans fell 9.7% to 488,000, as borrowers sought to lock in rates amid expectations of gradual monetary easing.
Arrears showed signs of improvement, with 10,420 mortgages over 2.5% in arrears, down 850 from the previous quarter.
However, repossessions rose to 900, up 28.6% from 700 a year earlier, reflecting the lagged impact of higher interest rates on heavily leveraged landlords.
LANDLORDS RECALIBRATING
Marylen Edwards, director of mortgages at specialist lender MT Finance, says: “While the industry prepares for the Renters’ Rights Bill changes which start to come into force from May 1st, professional landlords aren’t just surviving, they are recalibrating.
“We are seeing an increased year-on-year surge in lending value, while the average interest rate for new BTL loans has eased to 4.85%, down 37 basis points from a year ago. This softening is pushing the recalibration of portfolios as landlords lock in stability before the May 1st deadline.
“Despite the headwinds of 2025’s rate environment, it is 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. New landlords coming into the market are looking at longer-term strategic capital gains and the ability to uplift and grow a portfolio.”
MOMENTUM WILL GROW
And Louisa Sedgwick, managing director of mortgages at Paragon Bank, adds: “The marked uplift in the value and number of buy-to-let mortgages written compared to the previous quarter, and particularly the same period a year ago, demonstrates how landlords will invest in buy-to-let property when market conditions allow.
“The third quarter saw strong levels of remortgage activity, the highest since the final quarter of 2022, partly driven by landlords releasing equity to fund new acquisition.
“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.
“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.”
