UK Finance’s recent report highlights a significant surge in buy-to-let lending during Q2 2024, marking a pivotal moment for the market.
- The period saw 51,459 new buy-to-let loans, amounting to £8.9 billion, a considerable increase from the previous year.
- Average gross rental yields increased to 6.9%, indicating a positive shift in rental income for landlords.
- Fixed-rate mortgages rose by 2% year-on-year, while variable rate loans significantly declined.
- Arrears and possessions rose, indicating potential areas of concern despite overall market growth.
In Q2 2024, the landscape of the buy-to-let market in the UK witnessed a noteworthy advancement as the number of loans surged by 26%, resulting in a total of 51,459 new loans. These loans collectively accounted for £8.9 billion, showcasing a substantial 27.7% rise in value from the corresponding quarter in 2023. This robust rise is indicative of the market’s recovery from previous economic adversities.
The average gross buy-to-let rental yield observed an elevation to 6.9% from the previous year’s 6.51%, reflecting an increase in profitability for landlords. Concurrently, the average interest rate on new buy-to-let loans experienced a slight decrease of 0.21% from the last quarter, standing at 5.19%. It is, however, marginally higher than the rate observed in the same quarter of the prior year by 0.04%.
Notably, the sector saw a 2% year-on-year increase in fixed-rate buy-to-let mortgages, which reached a total of 1.4 million. In contrast, variable rate loans faced a significant downturn, decreasing by 14.8% to 565,815. Such shifts hint at a wider preference for stability amidst volatile economic conditions.
Despite these positive trends, challenges remain evident, particularly with the rise in arrears and possessions. By the end of Q2 2024, buy-to-let mortgages in arrears of more than 2.5% rose by 51% compared to the same quarter in 2023, totalling 13,570 cases. Additionally, possessions increased by 33.8%, reaching 710 cases, underscoring potential vulnerabilities within the market.
Reflecting on the data, Russell Anderson, the commercial director at Paragon Bank, remarked on the market’s positive trajectory, stating that the figures represent evidence of recovery towards pre-pandemic levels. He emphasised the significance of remortgaging, which has become a business driver, with figures climbing to £6.2 billion, the highest since the end of 2022. Moreover, the value of purchases rose consistently over three quarters, attaining £2.4 billion, nearing the £2.7 billion seen in the second quarter of 2019.
Overall, the buy-to-let market is showing signs of recovery despite some areas of concern.
