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Stuart Davidson, Chief Commercial Officer, Redwood Bank
2025 was not shaped by a single disruptive event but by sustained pressure across the property and SME lending markets. Higher-for-longer borrowing costs, ongoing regulatory reform and a more cautious mindset among landlords and SMEs combined to make decision-making more complex. Changes to tenant rights and rising sustainability expectations added further layers of challenge.
Despite this backdrop, the market showed resilience. Professional landlords continued to adapt and scale, brokers worked harder to structure viable solutions and lenders adjusted their approach to ensure good-quality cases could still progress. The year became less about chasing volume and more about realism, experience and long-term thinking.
From Redwood’s perspective, 2025 reinforced the importance of listening and responding. Much of the year was spent engaging with brokers and borrowers to understand how affordability pressures were affecting real-world decisions. That feedback helped shape changes to our lending approach to reflect market conditions.
Affordability sat at the heart of most conversations. Landlords approached refinancing with greater scrutiny, stress-testing deals and modelling multiple outcomes before committing. Higher interest costs on refinance, alongside rising operating expenses, continued to weigh on returns. Brokers needed lenders who could offer flexibility without compromising on credit discipline.
Across the cases we reviewed, one trend was consistent. Experienced landlords and established SMEs were more resilient. Portfolio clients continued to expand by acquiring assets from smaller landlords choosing to exit a market that increasingly rewards scale and professionalism. Strong assets, realistic gearing and dependable income streams mattered more than ever.
Against this backdrop, Redwood made a series of measured affordability enhancements during the year, shaped directly by broker feedback. Within residential investment lending, stress rates were reduced and affordability calculations refined to better reflect post-pandemic interest rate realities. These changes were designed to support landlords refinancing after several years of elevated rates and to create opportunities to restructure portfolios or release equity where appropriate.
On the commercial side, maximum loan terms were extended and debt service coverage requirements adjusted. This provided experienced landlords and SMEs with greater flexibility when structuring deals, particularly in cases where long-term income fundamentals remained strong but short-term costs were under pressure. The aim was not to loosen standards, but to ensure viable businesses were not constrained by rigid metrics that no longer reflected trading conditions.
Regulatory change also reshaped the operating environment. The Renters Rights Bill introduced new obligations, including the abolition of Section 21, a landlord register and expanded Decent Homes Standards. These measures increased both cost and operational complexity. Regardless of differing opinions on the reforms, the practical outcome is clear. The private rental sector is evolving towards a more professional model, where scale, systems and expertise are essential to manage risk and maintain margins.
While the Budget avoided the most severe outcomes some feared, it reinforced a broader message. Operating costs are unlikely to fall meaningfully in the near term and long-term planning is essential. Short-term strategies are becoming harder to sustain in a market defined by tighter regulation and closer scrutiny.
Overall, 2025 tested the resilience of the sector. Affordability pressures, regulatory change and tighter yields forced landlords, SMEs and brokers to rethink their strategies. In doing so, the market has become more disciplined and more professional. Brokers who embraced complexity and challenged assumptions added genuine value, and lenders who listened and adapted helped keep momentum where fundamentals were sound.
Looking ahead, the foundations are stronger. Professionalism is no longer a differentiator but a requirement. Those with experience, scale and a long-term view are best placed to drive sustainable growth in 2026 and beyond.