Buy-to-let lending increased in the first quarter of 2026 compared with a year earlier, with lower mortgage rates, stronger rental yields and falling arrears pointing to continued resilience in the landlord market.

There were 58,272 new buy-to-let loans advanced across the UK during the first quarter of 2026, worth £10.8 billion, according to the latest figures from UK Finance.

The number of new loans rose 3.26% compared with the same period last year, while the value of lending increased by 7.02%.

Average gross rental yields continued to strengthen, reaching 7.21% in the first quarter, up from 6.93% a year earlier.

Landlords also continued to favour payment certainty, with the number of fixed-rate buy-to-let mortgages outstanding rising 1.4% year-on-year to 1.47 million. Variable rate mortgages continued to decline, falling 9.5% to 453,000.

The average interest rate on new buy-to-let mortgages fell to 4.71% during the quarter. This was six basis points lower than the previous quarter and 29 basis points below the same period in 2025.

Lower borrowing costs helped improve affordability metrics, with the average interest cover ratio increasing to 221%, compared with 218% in the previous quarter and 204% a year earlier.

Arrears also continued to improve. At the end of the first quarter there were 8,960 buy-to-let mortgages in arrears of more than 2.5% of the outstanding balance, down by 560 cases compared with the previous quarter.

Meanwhile, there were 810 buy-to-let mortgage possessions during the quarter, unchanged from the same period a year earlier.

REFINANCING REMAINS KEY DRIVER

Louisa Sedgwick, managing director of mortgages at Paragon Bank, said: “Although buy-to-let lending moderated from the stronger levels seen at the end of 2025, activity in the first quarter remained ahead of the same period last year, indicating that the market continues to move in the right direction where conditions are supportive.

“Remortgaging remained a significant driver of lending and was higher than a year earlier. This points to landlords actively refinancing as they respond to broader affordability considerations and manage their portfolios, including supporting longer-term plans such as expansion and investment in existing properties.

“The value of outstanding balances also rose above £313 billion, underlining the resilience of the sector and its continuing role in supporting investment in privately rented homes.”

SECTOR NEEDS TIME TO SETTLE

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Although the implementation of the Renters’ Rights Act was imminent during the period this data covers, it doesn’t seem to have deterred landlords.

“An increase in new buy-to-let loans advanced in the first quarter of the year, up compared with the same period the previous year, points to investors who still recognise opportunities in the market.

“Perhaps the uptick in average yields explains that – investing in rental property is still working for many landlords and experienced ones in particular are expanding their portfolios where opportunities arise.

“Landlords continue to favour fixed-rate mortgages for the certainty they bring in what are volatile times in terms of pricing, with the number opting for variable rate loans falling.

“The average interest rate across new buy-to-let loans was six basis points lower than the previous quarter and 29 basis points down on the same quarter last year, with this downwards trend a further factor encouraging landlords to invest. With the average interest cover ratio rising thanks to falling lending rates, landlords are not overstretching themselves.

“With the number of landlords in arrears falling and possessions unchanged, the outlook for the sector is brighter than one might think given that the regulatory and tax burden on investors is increasing. The sector is becoming more professional and with more landlords incorporating in order to maximise returns, there are plenty of opportunities out there.

“However, now is not the time for further interference from government – the sector needs time to settle and get to grips with recent legislative changes.”

MARKET REMAINS RESILIENT

Richard Pike, sales and marketing director at Phoebus Software, said: “The latest figures from UK Finance show the buy-to-let market is in good health. Mortgage volumes in Q1 were up 3% by number and 7% by value year-on-year, driven by remortgage activity.

“While some smaller landlords have chosen to exit amid higher costs and regulatory change, larger portfolio landlords continue to invest and adapt. The trend shows the buy-to-let market is becoming more professional, not less resilient.

“Importantly, that transition has not been accompanied by rising levels of distress. Buy-to-let arrears remain low, demonstrating the sector’s resilience despite a challenging economic backdrop.

“For lenders and servicers, the priority is ensuring they have the technology, data and operational agility to support a changing landlord base. As portfolios become more sophisticated, servicing will play an increasingly important role in maintaining performance, identifying risk, and delivering better customer outcomes, and so it’s vital that lenders have the right servicing partner.”

INCREDIBLY RESILIENT

Raheel Butt, head of buy-to-let underwriting at specialist lender MT Finance, said: “The latest Q1 data from UK Finance shows an incredibly resilient buy-to-let sector. With figures showing a total lending volume of £10.8 billion across more than 58,000 loans, this proves that property investment remains a highly attractive, core asset class.

“What we are seeing is a strategic restructuring of the market. The 11.1% surge in remortgaging activity highlights a proactive landlord community. Savvy investors are taking control and optimising their existing portfolios.

“While high borrowing costs and preparation for the Renters’ Rights Act naturally caused a temporary dip in new house purchases, the fundamental demand for quality rental housing across the UK is stronger than ever.

“Crucially, the 6% quarter-on-quarter drop in mortgages in arrears, bringing the total down to just 0.47% of the market, is a fantastic indicator of stability. It shows that professional landlords are managing their leverage exceptionally well. It also underscores the value of robust, common-sense underwriting.”