The buy-to-let market has recorded strong growth through its lending patterns, with a much brighter outlook for the year ahead for landlord borrowing.
Buy-to-let mortgage borrowers took out 52,648 new UK loans during the final quarter of 2024, which was up by a huge 39.2% compared with Q4 2023, according to a new report from UK Finance.
In value, this equated to £9.6bn worth of borrowing for landlords, which is 47.2% more than the total borrowed in the final quarter of 2023, demonstrating a surge in market confidence and appetite from property investors thanks to an improving outlook.
Looking at interest rates, the landscape is also much more positive for landlords than it was a year previously, with buy-to-let mortgage rates having fallen by 0.13 basis points since Q3 2024, and by 0.61 basis points than 12 months earlier.
With analysts expecting more Bank of England base rate cuts over the course of this year – with some forecasting two and others three cuts – the lending outlook is expected to see further improvements for borrowers. What’s more, lender competition is growing, with a rise in the number of deals available for landlords to choose from.
Landlords remain keen to invest
The rise in the number of landlords taking out buy-to-let borrowing, as well as the increase in the amount borrowed, point towards continued investment in the UK rental market.
Despite other financial headwinds, the UK housing market remains a popular and profitable option for many, with some turning to new strategies in order to maximise their investments. Borrowing to buy can enable landlords to diversify their portfolios, often towards new locations that offer stronger rental demand or higher yields.
Another positive factor from UK Finance’s research is a decrease in the number of mortgages in arrears at the end of Q4 2024, with 12,610 in arrears greater than 2.5% of the outstanding balance. This is 390 lower than Q3’s figures, and 7% down from a year earlier.
Commenting on the figures, Russell Anderson, commercial director of mortgages at Paragon Bank, said the research reveals a “resurgent buy-to-let market throughout 2024, with strong growth in both purchase and remortgage activity”.
“The data supports our view that landlords are astutely managing their lettings businesses, borrowing to invest in higher yielding properties or refinancing to proactively manage debt across portfolios and improve privately rented housing stock.”
Buy-to-let yields continue to rise
The rental market continues to come under pressure from a shortage of supply, while tenants holding off stepping onto the property ladder mean a greater number of renters making offers on homes.
For tenants, this is pushing up rental prices, with UK Finance showing a continuing increase in costs across the country.
At the same time, buy-to-let landlords are increasingly prioritising high-yielding investments in order to navigate the current financial landscape, and this has been contributing towards rental yield rises in recent years.
The latest figures from Fleet Mortgages show that average yields in England and Wales have risen by 0.3% in Q1 2025 compared with the first quarter of last year, bringing them to 7.4%. This is the same increase as the previous quarter’s annual result, showing a steady and predictable market.
The North East and the North West both showed above-average growth in buy-to-let rental yields, rising by 0.8% and 0.5% respectively over the past year. This brings the average yield in the North East to 9.2%, and the average in the North West to 8.4%.
Steve Cox, chief commercial officer at Fleet Mortgages, said: “Rental yield levels are showing signs of stabilisation, however they are stabilising at a higher level due to the increases seen across most regions over the course of the last 12 months.
“That remains a real positive for landlords and much can be put down to the continued demand-supply imbalance, the fact rates have been moving downward, and affordability is easier to achieve across the board.
“We, of course, see regional variations across England and Wales, with a number of regions showing a dip in yields quarter-on-quarter, however as mentioned, this has to be set against the context where yields have shown significant increases over the past 12-18 months.”
