But pressures remain on smaller landlords, expert says
The UK’s buy-to-let mortgage market recorded a sharp increase in activity in the final quarter of 2024, according to new figures from industry body UK Finance.
A total of 52,648 new buy-to-let loans were issued in Q4 2024, representing a 39.2% jump in volume and a 47.2% rise in value compared to the same period in 2023. The total value of lending reached £9.6 billion.
Average rental yields across the UK increased to 7% during the quarter, up from 6.74% a year earlier. Meanwhile, the typical interest rate for new buy-to-let loans dropped to 5.09%, down 0.13 percentage points from Q3 and 0.61 points lower than in Q4 2023.
Improved financing conditions also boosted landlords’ interest cover ratios (ICR), with the UK Finance report showing a 201% rise in average ICR in Q4. That compares to 190% in Q1 and represents a year-on-year increase of 21 basis points.
Fixed rate products continued to dominate the market, with 1.43 million such mortgages outstanding at the end of 2024 – up 4.4% year-on-year. In contrast, the number of outstanding variable-rate loans dropped by nearly 16% to 518,000.
Arrears showed signs of easing. There were 12,610 buy-to-let mortgages in arrears greater than 2.5% of the outstanding balance, down 7% compared to Q4 2023. However, the number of repossessions remained flat on a quarterly basis at 700 cases, though this marked a 29.6% increase on the previous year.
“Figures published today by industry body UK Finance reveal a resurgent buy-to-let market throughout 2024, with strong growth in both purchase and remortgage activity,” commented Russell Anderson (pictured left), commercial director of mortgages at Paragon Bank.
“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.
“While encouraging, this increase is against a low base in 2023 and there continues to be an acute supply-demand imbalance in the private rented sector, underpinning rental inflation. More investment is needed into the sector to meet forecast levels of demand, so we would hope to see the momentum of last year continuing as the market recovers.”
Heather Hancock (pictured right), head of credit and operations at Black & White Bridging, also offered a cautious perspective.
“The latest UK Finance figures paint a more complex picture of the buy-to-let market than headlines might suggest,” she pointed out. “While it’s true that buy-to-let lending saw a notable increase compared to the previous year, this growth is likely being driven by professional and institutional landlords rather than the smaller investors who have historically formed the backbone of the sector.
“The rise in rental yields and improved interest cover ratios indicate that landlords who can weather the storm are still seeing opportunities, but the fundamental challenges remain. Higher taxation, tighter regulation, and affordability constraints continue to squeeze out smaller landlords, making buy-to-let increasingly the domain of those with significant capital reserves.”
While lending volumes are up, Hancock stressed that possessions have also increased by nearly 30% year-on-year.
“This suggests a market that remains under significant pressure, with some landlords exiting while others with deeper pockets move in,” she said. “The market may not be collapsing, but it is undeniably shifting towards a more consolidated landscape where only the most well-resourced investors can thrive.”
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