But challenges remain as arrears and possessions also climb
The UK buy-to-let mortgage market saw an increase in new lending in the third quarter of 2024, with 48,862 loans advanced, valued at £8.6 billion, according to the latest figures from UK Finance.
Loan numbers rose by 6.5% while value increased by 8.9% compared to the same period in 2023.
UK Finance’s quarterly update into buy-to-let lending also highlighted key trends within the sector, including an average gross rental yield of 6.93% in Q3, up from 6.53% in the same quarter last year. The number of fixed rate BTL mortgages also rose by 3.3% year-on-year to 1.4 million, while variable rate loans fell 14.9% to 541,488.
The average interest rate for new buy-to-let loans stood at 5.22%, a slight 0.03 percentage point rise from Q2 2024 but 0.09 percentage points lower than in Q3 2023. The average interest cover ratio increased to 195%, up from 190% in Q1 2024 - and higher than the 186% recorded a year earlier.
Despite these positive indicators, challenges remain. At the end of Q3 2024, 13,000 BTL mortgages were in arrears by over 2.5% of the outstanding balance. While this marked a decrease of 570 cases from the previous quarter, it was 19% higher than in Q3 2023. In addition, there were 710 BTL mortgage possessions in Q3 2024, a significant 73.2% increase year-on-year, although unchanged from the previous quarter.
“The rise in arrears and possessions highlights the pressures many landlords are facing, with increasing costs and policy changes squeezing profitability,” commented Oli Bland (pictured left), director of lending at Black & White Bridging. “For landlords who are prepared to adapt, there are still viable opportunities, but the overall environment requires careful planning and a long-term perspective.”
Richard Pike (pictured right), chief of sales and marketing at Phoebus Software, meanwhile, noted the sector’s resilience despite slower growth in Q3 compared to the previous quarter.
“While Q3 figures aren’t as strong as Q2, which saw a surge of 26% in buy-to-let business compared to Q3’s 6.5% rise, this still shows a strong, confident BTL market,” he said.
Pike referenced UK Finance’s annual report, which predicts a 7% drop in buy-to-let mortgage lending in 2025 due to regulatory changes, including the stamp duty increase announced in the Autumn Budget. However, he remained optimistic about the market’s long-term outlook.
“If all goes according to market predictions, interest rates and mortgage rates should drop in 2025, which should encourage many landlords – particularly professional portfolio landlords – to maintain hold of their properties,” he added.
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