Overall gross rental yields strengthened to 7.02% by the end of June, compared to 6.96% at the end of Q1, Paragon’s data reveals.

The lender’s Q2 buy-to-let (BTL) yields report found yields have been on an upward trajectory since the end of the Covid lockdowns, rising form 5.84% in 2021.

Regionally, Scotland has experienced the strongest growth in yield performance over the quarter, rising by 53 percentage points to 7.97%.

Landlords in the West Midlands recorded a 24pp increase to 7.24%, with those in Yorkshire & Humber increasing by 21pp to 7.58%.

Conversely, landlords in Greater London experienced the sharpest decline in yields, falling 16pp across the quarter to 5.58%.

Wales retained its position as the strongest yielding location at 8.87%, with Scotland’s strong increase resulted in it rising to joint second in the list with the North East, both achieving yields of 7.97%. London (5.58%) and the South East (6.48%) kept their position as the regions achieving the lowest yields.

Meanwhile, by property type data shows HMOs remained the highest yielding form of property at 8.90%, up 14pp, followed by multi-unit blocks at 7.18%.

Flats (6.45%) and terraced housing (6.31%) also scored highly from a gross rental yield perspective.

Paragon Bank managing director of mortgages Louisa Sedgwick says: “The second quarter saw a further strengthening in gross rental yields, continuing the positive trajectory we have seen in recent years.”

“While the pace of movement varies across regions, the overall picture remains one of resilient returns for landlords, supported by sustained tenant demand and more subdued house price growth in parts of the market.”

“Wales continues to lead the regional yield table, while Scotland, the West Midlands and Yorkshire and Humber all recorded notable quarterly improvements.”

“HMOs also remain the highest-yielding property type, underlining the importance of more specialist rental accommodation in delivering stronger income returns for landlords where there is clear local demand.”