Buy-to-let is bouncing back ‘with lending rocketing nearly 40% in the fourth quarter’

UK Finance has this morning published data showing that, in Q4 2024 there were 52,648 new buy-to-let loans advanced in the UK, worth £9.6 billion.

This was up 39.2 per cent by number (47.2 per cent by value) compared with the same quarter in the previous year.

It also revealed that, at the end of Q4 2024, there were 12,610 buy-to-let mortgages in arrears greater than 2.5 per cent of the outstanding balance.

This was down 390 from the previous quarter and 7 per cent lower than in the same quarter a year previously. However, there were 700 buy-to-let mortgage possessions taken in Q4 2024.

This was unchanged from the previous quarter, but an increase of 29.6 per cent on the same quarter a year previously. Additional findings below.

Newspage asked brokers for their views, bottom.

The average gross buy-to-let rental yield for the UK in Q4 2024 was 7 per cent, compared with 6.74 per cent in the same quarter in the previous year.

The average interest rate across all new buy-to-let loans in the UK was 5.09 per cent in Q4 2024. This was 0.13 basis points lower than in the previous quarter, and 0.61 basis points lower than in the same quarter of 2023.

Reflecting the downwards movement in interest rates, the average buy-to-let interest cover ratio (ICR) for the UK in Q4 2024 was 201 per cent, up from 190 per cent in Q1 2024 and 21 basis points higher than a year previously.

The number of BTL fixed rate mortgages outstanding in Q4 2024 was 1.43 million, 4.4 per cent up on a year previously. In contrast, the number of variable rate loans outstanding fell by 15.9 per cent to 518,000.

Ranald Mitchell, Director at Charwin Mortgages said, “Buy-to-let is dead. Long live buy-to-let. Buy-to-let is bouncing back with lending rocketing nearly 40% in the fourth quarter as landlords pile back into the market. With average rental yields hitting 7% and interest rates dipping, property investors are seizing the moment.

“Fixed-rate buy-to-let mortgages are on the rise, arrears are falling and affordability is improving, all clear signs the tide is turning after several turbulent years. But it’s not all good news. Possessions are up nearly 30% year-on-year, exposing the cracks for landlords stuck on older, unaffordable deals. It’s a market split between the bold and the broken. This comeback is not without casualties. However, the momentum is clearly building.”

Harry Goodliffe, Director at HTG Mortgages said, “It’s great to see a 40% rise in new buy-to-let loans. It shows that confidence in the market is still strong, despite the challenging economic climate. The fact that rental yields are holding steady is also encouraging, giving landlords a reason to be optimistic.

“That said, the increase in possessions is a stark reminder that some landlords are facing tough times. With the market constantly shifting, it’s crucial for landlords to adapt and stay ahead of the curve in order to protect their investments.”

Harps Garcha, Director at Brooklyns Financial added, “Even though it may not feel like there’s much good news for the buy-to-let sector, today’s lending data does offer a glimmer of hope. Rent increases, combined with a slight reduction in interest rates, have eased some of the pressure on landlords.

“While the recovery may be slow, the signs suggest we are heading in a more positive direction. That said, challenges remain, particularly with the looming introduction of the Renters Reform Bill. The sector must continue to adapt, but for now, there are reasons to be cautiously optimistic.”

Justin Moy, Managing Director at EHF Mortgages said, “The buy-to-let market has seen a suprising upturn over the past 12 months, where rental income has balanced against the rising cost of mortgage lending and still made it an attractive investment opportunity. We are seeing a change of landlord in the market. The Portfolio Landlord has been able to snap up relative bargains from those smaller landlords who are selling up, buying cheaper flats that continue to yield well. With a high percentage of borrowing on longer term fixed deals, there should be some stability over the coming years, easing the arrears and reposessions figures and helping to reduce rates at the same time.”

Riz Malik, Independent Financial Adviser at R3 Wealth added, “Landlords, especially those owning in personal names, are reducing exposure or leaving the market. Without lower rates and looser lending, rental supply could shrink further driving up rents. With the economy under pressure, rising arrears and potential job losses may leave landlords as well as their tenants in financial difficulty.”

Sean Horton, Managing Director at Respect Mortgages said, “The buy-to-let market is staging quite the comeback. With loans up nearly 40% by number, landlords clearly haven’t been put off by the endless tax and regulatory changes. HSBC’s recent move into 80% LTV lending shows lenders are competing for quality business again.

“Landlords are caught in a perfect storm of higher mortgage costs and tax/EPC burdens, forcing many to push rents higher just to break even. This isn’t greed – it’s simple survival. Yes, possessions are up but arrears are down, suggesting most landlords are managing fine. I would expect the arrears figure to gradually fall as lower rates emerge.

“For all the political hot air about the rental sector, the stark reality is we need landlords more than ever with housing supply at critical levels.”