The UK Finance Buy-to-let Mortgage Market Update showed that by value, this was 27.7% higher than the year before. 

Lending for buy-to-let house purchases came to £2.4bn in Q2, a 25.8% rise on 2023 while remortgage activity amounted to £6.2bn, a 27.7% uptick. 

There were 14,955 loans issued for purchase, 22.5% more than the same period in 2023, while remortgage loans totalled 34,878, a 27% jump. 

The increase in remortgage activity also aligned with a fall in the number of buy-to-let product transfers conducted in Q2, which dropped by 17.6% annually to 73,048, while the value of product transfer business declined by 7.3% to £12.5bn. 

This rise in overall business coincided with a decline in average buy-to-let mortgage rates, which came to 5.19% in Q2. This was 0.21% lower than in Q1 but 0.04% higher than the year before. 

Meanwhile, the average interest coverage ratio (ICR) sat at 196% during the second quarter of the year, up from 190% in Q1. This was flat on the same quarter a year before. The average gross buy-to-let rental yield was 6.9% in Q2, compared to 6.51% a year prior.

Rise in limited company buy-to-let lending 

The value of new lending to non-portfolio landlords with one to three mortgages amounted to £6bn during the quarter, a 28.35 rise on the year before. Meanwhile, lending to portfolio landlords totalled £2.9bn which was 26.2% higher year-on-year. 

There was a 68.8% yearly rise in the value of new lending to limited company borrowers, totalling £1.5bn in Q2, while lending to individual landlords rose 21.7% to £7.4bn. 

The number of outstanding buy-to-let fixed rate mortgages stood at 1.4 million in Q2, a 2% increase on the previous year. The stock of outstanding variable rate loans dropped by 14.8% to 565,815. 

Market back at pre-pandemic levels 

Russell Anderson, commercial director at Paragon Bank Mortgages, said the data was positive and “evidence of the market continuing to normalise following the challenging economic and political conditions experienced last year”.  

He added: “The figures reveal strong growth in total gross lending, in both the value and number of loans written, since the previous quarter and when compared to the same period in 2023.   

“Drilling down into the data, we that the maturities continue to be a key driver of business, with remortgaging during the quarter valuing £6.2bn, the highest since the end of 2022. Encouragingly, we also see that landlords are actively growing their portfolios, with the value of purchases increasing consecutively during the last three quarters to £2.4bn.

“If we compare this number with the £2.7bn of buy-to-let mortgages written for purchases in the second quarter of 2019, we see that today’s market has almost recovered to pre-pandemic levels.”  

Arrears and possessions climb 

At the end of Q2, some 13,570 buy-to-let mortgages were in arrears greater than 2.5% of the outstanding balance, a 52% surge on the year before. 

Some 710 buy-to-let mortgage possessions took place during the quarter, which was 33.8% more than the same period in 2023.