The average gross rental yields hit 6.1% in the first three months of the year, their highest level for almost four years, according to Paragon Bank.  

This rate is the third successive quarter of rises, and highest level since the second quarter of 2018 when yields hit 6.2%.  

The highest average yields of 7% were posted by landlords in North East England, followed by those in neighbouring Yorkshire & The Humber who reported yields of 6.6%, reports the lender’s study.  

Landlords in Outer London saw the lowest average yields of 5.2%, while landlords in Central London achieved 5.7%.  

The survey points out that houses in multiple occupation “have the potential to generate higher rental yields compared to single self-contained properties,” with average yields of 7% compared to 5.8% for single properties.  

Paragon Bank managing director of mortgages, Richard Rowntree says: “Against what has been a challenging economic backdrop, landlords are naturally looking for ways to maximise returns, but they are also attempting to mitigate the impact of a tax burden that has increased in recent times.   

“Alongside their yield generation potential, houses in multiple occupation appeal to investors because of the strong demand for affordable homes, particularly in areas where tenants would perhaps not be able to afford to buy or rent a whole property.  

“This is particularly evident at the moment, with high levels of rental inflation. Alongside a stabilisation of house prices, it is likely that this has contributed to improving yields.”  

Data firm Pegasus Insight surveyed 771 landlords in March for Paragon Bank.