Buy to let mortgage lending up 25% by value in Q2, UK Finance reports

The number of new buy to let mortgages increased by 20.6% in the second quarter of 2026 compared with the same period last year, according to the latest figures from UK Finance.

A total of 58,051 new buy to let loans were advanced during the quarter, worth £10.7bn. This represented a 25% increase in lending value compared with Q2 2025.

Remortgaging accounted for approximately three quarters of completed buy to let loans during the period, according to Paragon Bank, with activity expected to remain strong as five year fixed rate deals taken out in 2021 and 2022 reach maturity.

The average interest rate on new buy to let mortgages was 4.82% in Q2, up 12 basis points from the previous quarter but 18 basis points lower than a year earlier.

Meanwhile, the average gross rental yield remained broadly unchanged at 7.27%, compared with 7.26% in Q2 2025.

The average interest cover ratio (ICR) rose from 210% to 217% year on year, although this was down from 221% in the first quarter of 2026.

The number of outstanding fixed rate buy to let mortgages fell by 0.7% annually to 1.46 million, while variable rate mortgages declined by 3% to 450,000.

UK Finance also reported a further improvement in mortgage arrears. At the end of June, 8,390 buy to let mortgages were in arrears of more than 2.5% of the outstanding balance, a reduction of 570 compared with the previous quarter.

There were 630 buy to let mortgage possessions during Q2, down 20.3% compared with the same period in 2025.

Commenting on the figures, Louisa Sedgwick, managing director of mortgages at Paragon Bank, said:

"Remortgaging continues to be the story of 2026, accounting for approximately three quarters of completed buy-to-let loans during the period. We expect that trend to continue throughout the rest of this year and into 2027 as five-year loans written during the buoyant market of 2021 and 2022 mature.

"Overall lending has remained fairly robust considering the impact of the Iran War on mortgaging pricing, with the value and number of loans for buy-to-let house purchase in line with the average quarterly level recorded since 2024, the period when the market entered recovery following the mini-Budget."

Sedgwick also raised concerns about the longer term supply of rental properties, warning that new purchases may not be keeping pace with landlords leaving the market.

She added: "The number of new purchases today is running approximately 5,000 below the average run rate per quarter since 2013, however, and I suspect new stock entering the market is not keeping pace with exits.

"That creates long-term challenges for tenants through diminished choice and inflated rents, so policymakers need to be mindful of this growing imbalance between supply and demand as it considers next steps for housing policy."

Raheel Butt, head of BTL underwriting at specialist lender MT Finance, says: 

“The Q2 2026 numbers tell a positive story. Some 58,051 new BTL loans were advanced this quarter, up 20.6 per cent by number and 25 per cent by value year-on-year. This is a meaningful acceleration that reflects a market finding genuine momentum.

“Yields have held firm at 7.27 per cent, almost unchanged from a year ago, a reassuring signal that rental demand continues to underpin asset performance. On rates, the average across new BTL loans was 4.82 per cent, 18 basis points lower than Q2 2025, which will be welcome for landlords remortgaging off older fixed-rate products. 

“The steady contraction in total mortgages outstanding, both fixed and variable, reflects ongoing consolidation. For specialist lenders, that is not a concern. It means the cases we see are increasingly from professional, portfolio-focused borrowers with clear strategies and that is a healthy place for the market to be heading into the second half of 2026.”