30 years of buy-to-let: Sector grows into £300bn market representing a fifth of mortgage lending 

Thirty years after the introduction of buy-to-let mortgages, the sector has grown into a major part of UK housing finance, accounting for almost a fifth of outstanding mortgage lending.

September 1996 marked the public launch of buy-to-let at a press conference at London’s RAC Club, with the first products available under the buy-to-let banner available from October of that year.

Since its launch, the market has navigated the global financial crisis, significant tax reforms, tighter regulation, a pandemic and a period of higher inflation and interest rates. Over that time, landlords have adapted their approach to property investment, increasingly focusing on portfolio management, ownership structures and long-term business planning.

Paragon was one of the first lenders to offer buy-to-let mortgages and is marking the anniversary with a new report examining how the product has evolved.

The buy-to-let market now comprises 1.92 million outstanding loans worth £311.6bn, with annual lending reaching £40.3bn in 2025 alone, representing a fifth of total outstanding mortgage balances.

Buy-to-let lending has funded a private rented sector that has grown from fewer than two million to almost five million households in England, accounting for almost one in five homes.

Paragon highlighted the sector's strong long-term credit performance, finding that the proportion of buy-to-let mortgages in arrears has been lower than owner-occupier for every year since records began, bar one year. 

The analysis also highlights broader improvements across the private rented sector. The proportion of non-decent homes has more than halved over the past two decades, while energy efficiency standards have improved significantly as landlords have continued to invest in upgrading and modernising their properties.

Remortgaging now accounts for the majority of lending activity, reflecting the growing influence of experienced landlords managing established portfolios rather than investors acquiring individual properties.

John Heron, former Paragon executive director and one of the key figures involved in the creation of buy-to-let, said: "Demand for rented homes was growing, but landlords lacked access to finance designed around residential lettings. Buy-to-let was created to solve that problem and bridge that gap, encouraging investment into the private rented sector and helping to increase housing supply at a time when it was badly needed.

"The idea was straightforward. If owner-occupiers had mortgage products tailored to their needs, landlords should too. What followed was a lending framework that took into account different facets of lettings business and the people that operated them and created a more practical route for investors to provide privately rented homes."

Louisa Sedgwick, managing director of mortgages at Paragon Bank, commented: "Paragon's analysis shows just how much the market has evolved over the past three decades. Landlords have adapted to changing economic conditions, taxation and regulation, becoming increasingly strategic in the way they manage their portfolios and approach long-term investment.

"Many landlords now operate their portfolios as businesses, taking a long-term view of investment and responding to changing tenant expectations, housing standards and regulation. The result is a market that is more professional and commercially focused than when buy-to-let first emerged."

Nathan Emerson, chief executive of Propertymark, added: "The creation of buy-to-let showed what can be achieved when different parts of the housing industry work together. Letting agents were seeing first-hand the growing demand for rented homes and the challenges landlords faced accessing finance that reflected the realities of residential letting.

"Working alongside lenders including Paragon, ARLA helped develop a framework that encouraged investment into the private rented sector and increased the supply of homes available to rent. Thirty years on, that spirit of collaboration remains just as important."

Nigel Terrington, CEO of Paragon Banking Group, concluded: "Buy-to-let is part of Paragon's DNA. We were involved at the inception of the market and have supported landlords through every stage of its development over the past three decades.

"The needs of landlords today are very different from those of the mid-1990s. As the market has evolved, we've evolved with it, continuing to invest in specialist expertise, develop our lending and adapt our support to meet the changing needs of landlords and brokers.

"Our commitment remains the same as it was thirty years ago, helping responsible landlords invest in and provide good-quality rented homes."