The average yield achieved by landlords reached 6.72% in September, up from 6.69% at the end of the second quarter of 2024, Paragon Bank reveals.

The average yield increased from 6.48% during the same period last year.

The yield at the end of the third quarter was based on the average BTL property value of £343,356 and rental income of £23,076.

Yields have strengthened since mid-2022 as house price inflation stabilised and rents increased due to constrained availability of rental stock.

By property type, more complex property types achieved the highest yields.

Houses in multiple occupation (HMOs) continued to generate the highest yields at 8.34%, followed by freehold blocks at 6.66%. Flats and terraced houses achieved yields of 6.02% and 5.94%, respectively.

Regionally, landlords in the North of England (covering the North East and Cumbria) achieved the highest rental yields, at 8.02%, followed by Wales at 7.95%. Landlords in Greater London achieved the lowest yields at 5.52%.

Paragon Bank commercial director Russell Anderson says: “Yield performance has been improving over the past 18 months as house price inflation moderated, but the strong demand for rental property drove rental prices higher.”

“We typically see higher yields achieved by more complex buy-to-let propositions, but strong yields can also be achieved on more basic property types, such as flats and terraced homes.”