The buy-to-let market has faced its fair share of challenges in recent years. From rising mortgage rates to stricter regulations and increased stamp duty, many landlords have questioned whether property investment still makes financial sense. But despite these headwinds, the buy-to-let market continues to show resilience, with rental yields reaching their highest levels in over a decade.
So, is buy-to-let still worth it in 2025? The short answer is yes, but with important caveats. Success now depends more than ever on strategic planning, regional selection, and understanding the changing landscape.
The Current State of Buy-to-Let
As of 2025, there are 4.7 million buy-to-let properties being rented in the UK, representing around one in every five households. The market remains substantial, and demand for rental properties continues to outstrip supply.
Average rental yields hit 7.11% in April 2025, the highest level since February 2011. This represents a significant opportunity for investors who can navigate the current challenges. The average gross buy-to-let rental yield for the UK in Q2 2025 was 7.26%, compared with 6.9% in the same quarter the previous year.
These figures tell an encouraging story. While costs have increased, rental income has risen even faster, creating improved returns for well-positioned landlords.
What's Changed? The Challenges Facing Landlords
Higher Stamp Duty
From 1 April 2025, the stamp duty surcharge for buy-to-let properties increased from 3% to 5%. This means higher upfront costs when purchasing investment properties. For a property worth £300,000, this change adds an extra £6,000 to your initial investment.
The stamp duty increase affects your calculations from day one. You’ll need stronger yields or longer investment horizons to justify the additional expense.
Mortgage Rates Remain Elevated
As of February 2025, the average buy-to-let mortgage rate for a 2-year fix (75% LTV) was 4.3%. While this is down from the decade-high of 6.22% in July 2023, it’s still considerably higher than the ultra-low rates landlords enjoyed a few years ago.
Higher mortgage costs directly impact your monthly returns. As of April 2024, the average yearly return on a buy-to-let property after mortgage interest payments was £5,087, down from £9,309 in April 2020.
Energy Efficiency Requirements
The government has proposed raising the minimum Energy Performance Certificate (EPC) rating for rental properties to C by 2030. Currently, the minimum required EPC rating is E for all private rental properties, but landlords should prepare for tighter standards ahead.
The government proposes requiring landlords to invest in energy-saving measures such as insulation and efficient heating systems. While grants and support schemes are available, including the Warm Homes: Local Grant launching in 2025, these improvements require planning and capital.
Why Buy-to-Let Still Makes Sense
Strong Rental Demand
Demand for rental properties is currently at an all-time high, driven by affordability challenges among first-time buyers and a growing preference for flexibility. As of December 2024, rental prices surged by 9.0% year-on-year, significantly outpacing average wage growth.
This demand shows no signs of slowing. Young people are renting for longer, and the chronic shortage of rental homes means tenants often compete for quality properties. Understanding current market values and rental potential in your area is essential for making informed decisions.
Record-Breaking Yields
Average rental yields of 7.11% in April 2025 represent the highest level since February 2011 Estate Agent Today. For context, savings accounts rarely offer more than 4-5%, and stock market returns can be volatile. Property continues to offer both income and potential capital growth.
The key is choosing the right location and property type. Wales offers the best rental yields in the UK at 8.84% in Q3 2025, followed by the North East at 8.16% MoneyWeek.
Growing Landlord Confidence
Despite the challenges, more than half (52%) of buy-to-let landlords intend to purchase new properties in the next 12 months, a significant rise from 27% following the Autumn Budget. Professional landlords clearly see opportunities in the current market.
A record number of buy-to-let companies were set up in the first half of 2025, showing that investors continue to enter and expand in this sector.
Where to Invest: Location Matters More Than Ever
Not all areas offer equal returns. Your location choice can make or break your investment success.
Top-Performing Regions
Wales leads with rental yields of 8.84%, where the average house price in September was £227,845, well below the UK average of £298,184. The combination of affordable property prices and strong rental demand creates attractive returns.
Northern cities such as Manchester and Leeds stand out as high-growth areas, with rental yields in some locations reaching as high as 12% in high-performing areas. The North East also offers strong returns, benefiting from affordable property prices and steady tenant demand.
Local Expertise is Crucial
Understanding the local market is essential. Areas experiencing economic growth, infrastructure investment, and attracting young professionals typically offer the strongest opportunities for buy-to-let investors.
At Michael Anthony Estate Agents, we’ve spent over 30 years building deep knowledge of Buckinghamshire, Bedfordshire, and Hertfordshire. Our teams across the region understand exactly which properties offer the best returns in each neighbourhood.
Property Type Makes a Difference
Houses in Multiple Occupation (HMOs) deliver the highest rental yields, averaging 8.48% in Q3 2025, almost 1.5 percentage points more than the second-highest property type.
Freehold blocks also reported high average rental yields at 7.05%, whilst detached houses produced the lowest yields at 4.76%.
If you’re considering different property types or looking to expand your portfolio, professional guidance can help you understand the options that best suit your investment goals.
Smart Strategies for Today's Market
Buy Below Market Value
With house prices rising faster than rents in some areas, finding properties below market value becomes even more important. This might mean looking for properties that need cosmetic improvements or targeting motivated sellers.
Focus on Energy Efficiency
Properties with better EPC ratings command higher rents and attract tenants faster. Major property portals now display EPC ratings prominently in search results, making energy efficiency a key factor in tenant decision-making.
Investing in improvements now, before they become mandatory, positions you ahead of the market. You’ll benefit from reduced void periods and potentially higher rental income.
Consider Incorporation
A record number of buy-to-let companies were set up in the first half of 2025, with incorporations rising sharply even after April’s stamp duty increase. Many landlords find tax advantages in holding properties through a limited company structure.
Take a Long-Term View
Buy-to-let works best as a long-term investment. The sector is consolidating, with fewer landlords managing larger, more professional portfolios. Those who treat property investment professionally and plan for the long term continue to succeed.
Getting Started or Growing Your Portfolio
Whether you’re a first-time landlord or looking to expand, success depends on thorough research and expert guidance. Here’s what to consider:
- Run detailed financial projections including all costs: mortgage payments, maintenance, insurance, void periods, and potential tax liabilities.
- Understand your local market deeply. What types of properties are in demand? What do tenants in your area prioritise?
- Plan for future regulations. Energy efficiency requirements will only get stricter. Factor improvement costs into your calculations.
- Build a support team. From financial advisers to letting agents, the right professionals make all the difference.
Frequently Asked Questions
What is the average rental yield on buy-to-let properties in 2025?
The average gross rental yield across the UK in Q2 2025 was 7.26%, the highest level in over a decade. However, yields vary significantly by region, with Wales offering 8.84% and HMO properties averaging 8.48%.
How much deposit do I need for a buy-to-let mortgage?
Typically, you’ll need a deposit of 25% of the property price, though this can range from 20% to 40% depending on the lender and your circumstances. Buy-to-let deposits are generally higher than standard residential mortgages.
Are buy-to-let mortgage rates coming down?
Mortgage rates have decreased from their 2023 peaks. As of February 2025, average 2-year fixed buy-to-let rates sit at around 4.3%, with products generally ranging between 5% and 6% for most borrowers. Rates remain higher than pre-2022 levels but have stabilised.
Will I have to upgrade my property's EPC rating?
Currently, the minimum EPC rating is E. The government has proposed raising this to C by 2030, though exact timelines are still under consultation. Planning for improvements now helps you stay ahead of regulations and can increase rental income.
Can I still make money with buy-to-let despite higher costs?
Yes. Whilst costs have increased, rental yields have actually improved, reaching their highest levels since 2011. Success depends on careful property selection, understanding your local market, and professional management. Regional differences mean some areas offer significantly better returns than others.
What are the tax implications of buy-to-let in 2025?
Landlords can only claim basic-rate tax relief on mortgage interest payments. Higher-rate taxpayers face increased tax bills as a result. Many landlords now purchase through limited companies for tax efficiency. It’s essential to seek professional advice tailored to your situation.
Why Choose Michael Anthony Estate Agents
For over 30 years, Michael Anthony Estate Agents has helped property investors make informed decisions across Buckinghamshire, Bedfordshire, and Hertfordshire. Our experience through multiple market cycles means we understand what works and what doesn’t.
Our local expertise sets us apart. Each of our branches knows its local market inside out. We understand which streets command premium rents, which property types attract the best tenants, and where the opportunities lie.
Whether you’re considering your first buy-to-let investment or expanding an existing portfolio, we offer:
- Free, no-obligation property valuations to assess investment potential
- Comprehensive landlord services including tenant finding and property management
- Expert knowledge of local rental markets and tenant demand
- Connections to financial advisers and conveyancing services
As members of the Property Ombudsman Scheme and the National Association of Estate Agents, we provide the professional standards and peace of mind you need when making significant investment decisions.
The Bottom Line
Buy-to-let remains a viable investment strategy in 2025, but the days of easy returns are over. Success requires careful planning, strategic property selection, and professional management.
The fundamentals remain strong: rental demand exceeds supply, yields have reached decade-highs, and the UK continues to face a chronic housing shortage. However, higher entry costs, increased regulation, and elevated mortgage rates mean you need to be more selective than ever.
If you’re considering buy-to-let investment, now is the time to seek expert local advice. Contact our team today for a free property valuation and to discuss whether buy-to-let is right for your financial goals. With the right guidance and strategy, property investment can still deliver solid returns and long-term wealth building.