24 Skyline | Edition 8 | Winter 2025

At the start of the year, there was plenty of optimism about the prospects for the buy to let market.

Instead, activity has been steady and stable rather than spectacular.

David Whittaker

Chief Executive Keystone Property Finance

Advisers who help clients navigate incorporation, explore higher-yielding strategies, or remortgage effectively can add real value in a market that, while not booming, continues to perform steadily

But, after three challenging years, that stability is to be welcomed and provides a strong platform for future opportunities.

As we move towards the end of 2025, it’ s a good moment to take stock of where the market stands today and what is coming down the line. Let’ s start with the lending data.

Last year, total buy to let lending reached nearly £ 34bn, with forecasts for 2025 ranging from cautious to bullish. The Intermediary Mortgage Lenders Association( IMLA) predicted £ 38bn of gross lending this year, while UK Finance forecasting a broadly flat market.

According to UK Finance, buy to let lending reached £ 19.3bn in the first half of the year – up 20.8 % on the same period in 2024. At first glance, that leaves the market on track for IMLA’ s more optimistic forecast. But the picture is more nuanced.

The third quarter is usually weaker, and signs suggest 2025 has followed the same pattern. That means an exceptionally strong Q4 would be required to reach £ 38bn.

While not impossible, lending is more likely to end the year around £ 35- £ 36bn – but somewhat above UK Finance’ s position. That may sound disappointing, but it would mean lending was still 25 % higher than in 2023, the weakest year for buy to let lending since 2014.

In a mature market like buy to let, double-digit growth is rare. Against that backdrop, stability should be seen as an achievement in itself and being nearly 10 % up on 2024 numbers should be equally welcomed.

The more bullish forecasts for 2025 were underpinned by the assumption that mortgage rates would fall meaningfully. That has happened, but not to the extent many hoped.

The Bank of England has cut rates three times this calendar year, bringing Base Rate down to 4 % – broadly in line with expectations. But Base Rate only indirectly influences fixed-rate mortgage pricing. What really matters are SWAP rates.

At the time of writing, two and five year SWAPs are down 56 and 30 basis points respectively since January.

That has fed through into modest reductions in mortgage pricing. Between the end of last year and June, the rate paid by the average landlord fell by around 10 basis points, according to the most recent data from UK Finance.

However, while SWAPs are noticeably lower than they were at the start of the year, they have barely moved in the past two months, suggesting markets expect interest rates to remain higher for longer.

Sticky inflation is part of the reason, but political risk also plays a role. Concerns about the UK’ s fiscal credibility have pushed up GILT yields, which in turn feed directly into SWAP rates.

This‘ risk premium’ has kept funding costs elevated. Barring a major shift in markets, mortgage rates are unlikely to fall much further before year-end. The consensus opinion is that there is just a