New figures from UK Finance show that 8,390 buy-to-let mortgages were in arrears of more than 2.5% of the outstanding balance at the end of the second quarter of 2026.
This represented a fall of 570 cases compared with the previous quarter and a 25.6% decrease year on year. Meanwhile, 630 buy-to-let properties were repossessed during Q2, down 20.3% from the same period in 2025.
Buy-to-let lending increases
The figures also reveal stronger lending activity across the sector. During Q2 2026, lenders issued 58,051 new buy-to-let loans worth £10.7 billion across the UK.
Compared with the same quarter in 2025, the number of loans rose by 20.6%, while their total value increased by 25%.
However, the annual growth needs to be considered in context. Lending activity was unusually subdued in Q2 2025 following changes to Stamp Duty in the first quarter of that year, which encouraged some borrowers to bring forward their purchases. Remortgaging has also increased as more fixed-rate mortgage deals reach the end of their terms.
Loans for new buy-to-let purchases reached 16,026 in Q2 2026, representing a 23% increase in volume and a 27.9% rise in value compared with the previous year.
Rental yields remain stable
The average gross rental yield for buy-to-let properties across the UK stood at 7.27% in Q2 2026, almost unchanged from 7.26% a year earlier.
The average interest cover ratio was 217%, down 4% from the previous quarter but higher than the figure recorded in Q2 2025. This measure indicates how comfortably rental income covers mortgage interest payments, with changes reflecting movements in borrowing costs.
The number of outstanding fixed-rate buy-to-let mortgages fell slightly to 1.46 million, a 0.7% decrease year on year. Variable-rate mortgages also declined, dropping by 3% to 450,000.
Market outlook remains mixed
A UK Finance spokesperson said the figures suggested that the buy-to-let market was showing resilience, although the strong annual growth partly reflected weaker activity during the same period last year.
Compared with the first quarter of 2026, the market appeared more settled, with remortgaging increasing slightly while lending for new purchases eased. The spokesperson also warned that higher borrowing costs could continue to weigh on demand and limit lending growth throughout the year.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said the rise in new buy-to-let lending suggested that investors continued to see opportunities in the market.
He pointed to relatively stable rental yields as one reason landlords, particularly experienced investors, were continuing to expand their portfolios where suitable opportunities arose.
Although average interest rates on new buy-to-let loans increased by 0.12 percentage points compared with the previous quarter, they remained 0.18 percentage points below the level recorded a year earlier.
Mr Harris also highlighted the fall in mortgage arrears and repossessions, arguing that the sector’s position was more positive than might be expected given increasing regulatory requirements and tax pressures.
He added that the market was becoming more professional, with some landlords incorporating their businesses to improve returns. However, he cautioned against further government intervention, saying landlords needed time to adjust to recent legislative changes.
Overall, the latest figures point to a buy-to-let market experiencing stronger lending activity alongside fewer arrears and repossessions. Nevertheless, borrowing costs, taxation and regulatory changes remain important considerations for landlords assessing their next investment decisions.
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