UK Finance’s Buy-to-let Mortgage Market Update showed the value of new BTL mortgages was £11.2bn in Q4, a 21.3% jump on the last year.
UK Finance did not report a value of new BTL mortgages for the period, but the number of contracts completed fell 1.2% to 17,254.
By contrast, the number of remortgages rose 28% year-on-year to 40,176, while the value of this rose 30.2% to £7.8bn.
There was a 26.5% rise in the value of new lending to non-portfolio landlord borrowers in Q4 to £8.1bn, defined by those with up to three BTL mortgages, while lending to portfolio landlords increased 9.5% to £3.1bn.
The value of mortgages issued to individual landlords during the period was £8.7bn, 18.5% higher than the year before, while lending to limited company borrowers rose 32.4% to £2.5bn.
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BTL momentum was building
Louisa Sedgwick, managing director of mortgages at Paragon Bank, said the figures showed that landlord confidence was beginning to improve.
She added: “The data shows a clear pick-up in activity, with both lending volumes and values up materially on the same quarter in the previous year.
“While the figures predate the latest rise in geopolitical tensions and the resulting pressure on rates and mortgage pricing, they still point to underlying resilience in the sector. Where conditions are stable, and returns remain viable, landlords continue to invest against a backdrop of sustained demand for rented homes and limited supply.”
Raheel Butt, head of underwriting for BTL at MT Finance, said the data gave a “definitive conclusion to a year defined by professional resilience”.
He said: “The final quarter saw the momentum of the year-on-year surge in lending value reach its peak. This activity was fuelled by a continued easing of borrowing costs.
“Ultimately, Q4’s performance confirms that the barrier to entry has evolved. New entrants are now bypassers 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. BTL is not just continuing; it is maturing into a more disciplined, professional and institutionalised sector.”
Arrears and average rates fall
As rates fell during the period, the average interest rate on all new BTL mortgages was 4.77% in Q4, eight basis points lower than the previous quarter and 32 basis points lower than the same period a year earlier.
The average interest cover ratio (ICR) was 218% in Q4, up from 201% the year before and 215% the preceding quarter.
Some 9,520 BTL mortgages were in arrears of more than 2.5% of the outstanding balance in the final quarter of 2025, a 910 reduction on the previous quarter.
There were 770 BTL possessions during the period, a 10% rise on the last year.
BTL investments were more profitable in Q4, with the average rental yield rising from 6.99% at the end of 2024 to 7.18% in Q4 2025.
Some 1.46 million BTL fixed rate mortgages were outstanding in Q4, 2% up on the year before, while the number of deals on variable rates fell 9.8% to 466,000.
