Average gross buy-to-let rental yield hits 7.26% according to UK Finance
Quick Summary
The UK’s average gross buy-to-let rental yield rose to 7.26% in Q2 2025 — up from 6.9% a year earlier — as landlords benefit from stronger rental income and easing mortgage rates. If the average interest rate is 5 per cent, then lots of landlords could switch to significantly cheaper mortgage rates and improve their rental yields.
Cheaper buy-to-let mortgages, stronger rental yields and an increase in the number of landlords incorporating their property portfolios into limited companies have not helped to boost growth in a relatively flat buy-to-let market.
In Q2 2025, there were 49,590 new buy-to-let loans advanced in the UK worth £8.8 billion, according to the UK lending figures from UK Finance.
This was relatively flat compared with the same quarter in the previous year, down 2.6 per cent by number and 0.2 per cent by value.
The average gross buy-to-let rental yield for the UK in Q2 2025 was 7.26 per cent, compared with 6.9 per cent in the same quarter in the previous year.
What is the average buy-to-let mortgage rate?
The average interest rate across all new buy-to-let loans in the UK was 5.0 per cent in Q2 2025. This was 2 basis points higher than in the previous quarter, and 19 basis points lower than in the same quarter of 2024.
Aaron Strutt, product director at Trinity Financial, says: "If the average interest rate is 5 per cent, then lots of landlords could switch to significantly cheaper mortgage rates and improve their rental yields.
"Lenders like BM Solutions offer two-year fixes below 3% with chunky arrangement fees and rates closer to 4 per cent with £1,500 fees. Five-year fixes with pretty low arrangement fees are also priced around 4 per cent."
Reflecting the downwards movement in interest rates, the average buy-to-let interest cover ratio (ICR) for the UK in Q2 2025 was 210 per cent, up from 192 per cent in Q2 2024 and 201 in the previous quarter. Again, this is based on UK Finance figures.
How many buy-to-let mortgages are outstanding?
The number of buy-to-let fixed rate mortgages outstanding in Q2 2025 was 1.47 million, 5.5 per cent up on a year previously. In contrast, the number of variable rate loans outstanding fell by 18.0 per cent to 463,000.
At the end of Q2 2025 there were 11,270 buy-to-let mortgages in arrears greater than 2.5 per cent of the outstanding balance. This was down 560 from the previous quarter.
There were 790 buy-to-let mortgage possessions taken in Q2 2025, up 11.3 per cent on the same quarter a year previously.
Record number of landlords go professional to try and beat tax changes
The number of buy-to-let companies set up in September was the highest monthly tally since 2007 as landlords looked to shelter their profits from the taxman and higher interest rates.
There were 6,493 landlord incorporations last month and 51,295 since the beginning of the year, according to the estate agency Hamptons — the busiest first nine months of a year since the company began tracking the data 18 years ago.
Call Trinity Financial on 020 7016 0790 to secure a buy-to-let mortgage, book a consultation, or complete our mortgage questionnaire.
The information contained within was correct at the time of publication but is subject to change.
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