A total 49,590 new buy-to-let (BTL) loans were advanced in the UK during Q2, worth an estimated £8.8bn, new figures published by UK Finance have shown.

The banking trade body was relatively flat compared with the same quarter in 2024, down 2.6% in the number of loans but just 0.2% by loan value.

UK Finance’s data revealed that the average gross BTL rental yield for the UK in Q2 was 7.26%, which compared with 6.9% in the same quarter last year. The average interest rate across all new BTL loans in the UK was 5%, which was two basis points higher than in the previous quarter, and 19 basis points lower than Q2 2024.

Reflecting the downwards movement in interest rates, the average BTL interest cover ratio (ICR) for the UK in Q2 was 210%, up from 201% in Q1, and from 192% in Q2 last year.

“Although mortgage completions were lower than the first quarter of the year and when compared to the same period in 2024, they must be viewed in the context of the market distortion brought about by changes to stamp duty at the end of March,” managing director of mortgages at Paragon Bank, Louisa Sedgwick, commented.

“Landlords brought forward transactions to benefit from the higher stamp duty thresholds and lower their tax exposure.

“There were over 9,500 mortgaged house purchase completions in March, compared to fewer than 3,500 in April, highlighting the impact of changes to stamp duty on the normal flow of business. However, market activity has been positively building back up throughout the second quarter and into the third.

UK Finance’s figures also showed that the number of BTL fixed rate mortgages outstanding in Q2 was 1.47 million, a total 5.5% up on a year previously.

By contrast, the number of variable rate loans outstanding fell by 18.0%, to 463,000.

“It’s also interesting to note an uplift in the value of outstanding balances,” Sedgwick added. “These have been increasing since the second half of last year and now sit above £300bn, something not seen since the second quarter of 2023.”

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