Trends, challenges and opportunities.
Curious about how you can help your clients with their mortgage deals in the 2025 Buy-to-Let (BTL) market? This article is here to give you an overview of this year’s mortgage market. Keep reading to find out more!
2025 BTL mortgages market overview
The BTL remortgage market is set for some growth in 2025. We expect an increase in remortgaging activity as landlords seek to take advantage of favourable market conditions and secure better mortgage terms. This growth is driven by a combination of factors, including rising property values, increased rental demand, and the need for landlords to fine-tune their financial portfolios.
But keep an eye on rent increases, as the pace might slow down as affordability hits its limits. Still, the imbalance between supply and demand will continue to favour buy-to-let investments.
With big changes on the horizon like the Renters’ Rights Bill, Awaab’s Law, and EPC targets, UK Finance is predicting a 7% drop in mortgage lending for buy-to-let purchases this year compared to last. And our recent PRS Trends report shows that about a third of landlords might sell some or all of their rental properties.
But don’t worry—this could open up new opportunities for buyers looking to enter the market.
Potential challenges in BTL mortgages
Interest Rates
The Bank of England kept rates at 4.75% in December 2024 after two cuts earlier in the year. It’s tricky to predict future rates because it depends on whether inflation stays at or below the Bank’s target.
But recent budget changes, like higher minimum wages and increased National Insurance contributions, have changed what most people expect. Financial markets and the Bank itself now expect rates to be cut more slowly than what they previously thought. The Organisation for Economic Organisation for Economic Co-operation and Development (OECD) also believes that rates will stay higher for longer because of the budget changes.
Stamp Duty Surcharge
Rachel Reeves’ first Budget as Chancellor included an increase to the Stamp Duty surcharge for second homes. It went up by two percentage points to 5%, from the original 3% introduced by George Osborne in 2016.
And this first hike has shifted where buy-to-let purchases are happening:
- Northern England: More mortgages are being written for property purchases up north, while the southern regions have seen a decline.
- London and the South East: Back in 2014, 46% of buy-to-let purchases were in London and the South East. Now, that’s dropped to 32%.
- North East, North West, and Yorkshire & Humber: These areas have seen their share grow from 22% to 35% over the same period.
Where there are challenges, there are opportunities…
Higher Stamp Duty bills in places like Greater London can make investing there less appealing. But landlords are finding better opportunities in the North East, North West, and Yorkshire & Humber.
These regions have much lower Stamp Duty costs, making them attractive buy-to-let investments. And landlords can recoup these costs through lower purchase prices and potentially higher rental yields.
Learn more about what other factors are driving the buy-to-let market in the north of England from our Northern England report.
Remortgage opportunities?
Mortgage rates are still higher than they’ve been for most of the past decade. Every year until 2027, about 800,000 fixed-rate mortgages with interest rates of 3% or lower are set to expire. When these mortgages expire, landlords will need to refinance at the current rates, which could increase their monthly payments for those coming off 5-year fixed mortgages. However, those coming off 2-year fixed mortgages might actually see lower rates.
It’s really important for landlords to think about remortgaging when their initial fixed-rate term ends. They might be able to get better rates and terms that fit their current financial situation, especially with interest rates changing.
Which? also predicts that the base rate might drop to 4% by the end of the year. If this happens, it could lower the cost of borrowing and boost market confidence. Now would be a great time for landlords to reassess their mortgage options and potentially lock in better rates.
Property upgrades
Instead of buying new properties, refreshing existing ones can be a smart move. There’s a growing demand for greener properties, and a few upgrades like improving insulation and draught-proofing windows might be all it takes to boost an EPC rating. Tenants are increasingly seeking eco-friendly homes and may be willing to pay a premium for them.
And if a landlord is planning to refurbish the property to further improve its EPC rating, they might benefit from specialised remortgage products like our refurb to let, which can provide them necessary funds for upgrades and ultimately increasing the property’s value.
Engage with your landlords early
It’s very important to get in touch with landlords early and keep the conversation going. Reach out well before their current mortgage terms expire so you can help them explore their options and make smart decisions.
This way, you get to know their needs and goals, and you can offer advice that really fits what they’re looking for.
Regular check-ins, personalised service, and sharing useful info about market trends and new mortgage products can make a big difference and help you build strong relationships with your clients. And we’ll be by your side to support you along the way.