The buy-to-let sector is showing renewed signs of confidence, helped by more competitive mortgage rates. According to UK Finance, the average interest rate on new buy-to-let mortgages in Q1 2025 was 4.89%. That’s down from 5.09% at the end of 2024 and from 5.7% a year earlier.

That reduction, while modest, has coincided with a clear increase in new lending. Loans for new BTL property purchases rose by 42% in value in Q4 2024 compared with the same period in 2023, and by 39% in terms of the number of loans.

While lower interest rates have certainly helped, this growth also reflects wider market trends. The slowdown in investment across 2022 and 2023 was shaped by high inflation, rising base rates, and uncertainty around rental reform. With inflation easing and the Bank of England expected to continue cutting rates later this year, confidence is returning.

There is also evidence that landlords are acting now on plans that were previously put on hold. Decisions paused during the last 18 months are back in play, driven not just by more attractive mortgage options but by strong tenant demand and consistent rental yields.

In Q1 2025, average gross rental yields reached 7.1%, up 0.3% on the same period last year. Lower borrowing costs are helping to improve margins, particularly in areas where demand continues to outstrip supply.