UK Buy-to-let market sees significant growth in Q2 2024, despite economic pressures.
- The number of new buy-to-let loans in the UK increased by 26% compared to Q2 2023.
- Total value of buy-to-let loans rose by 27.7% to £8.9 billion.
- Average gross rental yields for buy-to-let properties increased to 6.9%.
- Remortgaging activities reached £6.2 billion, marking the highest since late 2022.
In a resilient display amidst challenging economic conditions, the UK buy-to-let market witnessed a marked growth in the second quarter of 2024. Reports from UK Finance indicate a substantial 26% increase in the number of buy-to-let loans compared to the same period the previous year, totalling 51,459 new loans.
The financial magnitude of these developments is further underscored by a 27.7% surge in the overall value of buy-to-let loans, amounting to £8.9 billion together with an increased average gross rental yield, which climbed to 6.9% from 6.51% a year earlier. Such figures underscore the sector’s capacity to attract investment despite the persisting economic uncertainties.
Beyond these significant advances, the average interest rate on new buy-to-let loans was reported at 5.19% in the second quarter, demonstrating a slight decrease from the first quarter of the year. However, this rate was marginally 0.04% higher than what was observed during the same timeframe last year.
A closer look into the loan details revealed that the average interest cover ratio remained stable year-on-year at 196% but saw an increase from 190% in the previous quarter. Additionally, fixed-rate mortgages within the buy-to-let sphere expanded by 2% over the year, reaching a total of 1.4 million, while variable-rate loans experienced a noteworthy decline of 14.8%, settling at 565,815.
Another critical finding is the rise in the number of buy-to-let mortgages in arrears for more than 2.5%, which escalated by 51% from the year earlier, totalling 13,570. Meanwhile, possessions also saw an increase to 710, reflecting a 33.8% upturn from the corresponding quarter last year.
Russell Anderson, the commercial director at Paragon Bank, remarked, “UK Finance’s buy-to-let update is positive and acts as evidence of the market continuing to normalise following the challenging economic and political conditions experienced last year.” He highlighted the strong growth in both the value and number of loans, reinforcing the narrative of market recovery.
A key driver behind these figures has been the surge in remortgaging valuations, which reached £6.2 billion, marking the most significant activity of its kind since the end of 2022. Notably, landlords have been increasing their purchasing activities, as evidenced by the rising value of purchases for the past three consecutive quarters, now at £2.4 billion, nearing pre-pandemic levels.
The Q2 2024 data paints a picture of a robust recovery and sustained growth in the buy-to-let sector, despite past economic adversities.
