The UK Finance BTL Mortgage Market Update showed a sharper decline in purchase activity, with a 9.2% plunge to 13,423. BTL remortgages stayed relatively stable and made up most of the market, rising by a marginal 0.7% to 34,734.
The value of BTL lending in Q2 was also flat, with a 0.2% fall to £8.8bn.
This was made up of £6.4bn in remortgages, 5.4% higher than last year, while the value of BTL purchase lending dropped 11.7% to £2.1bn.
The UK Finance data showed a notable interest in investment in Wales, as the nation saw a 25.6% jump in the number of purchase loans, at 590, and the value of lending rose 36.8% to £74m.
This compared to England, where purchase loans totalled 11,259 – an 11.6% decline on last year – and the value of this lending dropped 13.9% to £1.9bn. In Northern Ireland, the value of BTL house purchase loans came to £29m, a 1.4% decrease on last year, while there were 6.6% fewer loans totalling 334.
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The number of BTL house purchase loans in Scotland totalled 1,240 in Q2, a 1.6% rise annually, while the value of this lending was 6.3% higher at £125m.
There were 72.8 billion product transfers completed in Q2, a 0.4% decline on last year, and the value of this fell by 0.2% to £12.5bn.
A mixed picture for the BTL market
Louisa Sedgwick, managing director of mortgages at Paragon Bank, said: “Although mortgage completions were lower than the first quarter of the year and when compared to the same period in 2024, they must be viewed in the context of the market distortion brought about by changes to stamp duty at the end of March. Landlords brought forward transactions to benefit from the higher stamp duty thresholds and lower their tax exposure.
“There were over 9,500 mortgaged house purchase completions in March, compared to fewer than 3,500 in April, highlighting the impact of changes to stamp duty on the normal flow of business. However, market activity has been positively building back up throughout the second quarter and into the third.
“More broadly, it’s also interesting to note an uplift in the value of outstanding balances. These have been increasing since the second half of last year and now sit above £300bn, something not seen since the second quarter of 2023.”
Megan Eighteen, president of ARLA Propertymark, added: “These mixed results highlight the ongoing uncertainty facing the BTL market, driven by wider economic pressures. Inflation remains stubbornly high, interest rates are still elevated compared to pre-pandemic levels, and stamp duty thresholds are less favourable than in the same period last year. Combined with the anticipation surrounding the upcoming Autumn Budget, many investors are choosing to hold off on decisions until there is greater clarity.
“That said, there are still reasons for cautious optimism. Some areas of the country are seeing improved rental yields compared to this time last year, and the number of BTL mortgages in arrears has declined since the previous quarter.
“We hope to see economic conditions stabilise in the near future to support a stronger and more confident BTL sector.”
More demand from smaller landlords
Non-portfolio landlords were more active during the period, accounting for £6.4bn in lending, a 6.7% rise on the year before. Meanwhile, lending to portfolio landlords with more than four properties declined 14.7% to £2.4bn.
There was a 2.5% fall in lending to individual landlords, totalling £7.1bn, and lending to limited company landlords rose 11.7% to £1.7bn.
The average interest rate of a BTL mortgage in Q2 was 5%, 0.19% lower than last year.
The stock of fixed rate BTL mortgages was 1.72 million, 5.5% higher than in 2024, while variable rate mortgages dropped 18% to 463,000.
BTL arrears fall but possessions rise
There were 11,270 BTL mortgages in arrears in Q2, 16.9% lower than last year, but the number of possessions was up 11.3% at 790.
