Annual rental yield is up across all regions of England and Wales, according to the latest buy-to-let rental barometer from Fleet Mortgages.
The specialist lender’s Q1 barometer reveals rental yields have risen from 6% to 6.5% year-on-year and from 6.4% to 6.5% since the last quarter of 2022. This represents the highest rise on record since the rental barometer was first published.
Every region experienced both annual and quarterly rises, except the North West and the South West which had declines of 0.1% and 0.2% respectively.
The North East of England remains at the top spot for an 11th consecutive quarter, with a rental yield of 8.8%, representing an annual rise of 0.4% and a quarterly rise of 0.6%. Yorkshire and Humberside moved into second place with 7.7%, closely followed by Wales which saw a 1.1% jump in annual yield up to 7.6%.
Fleet says these increased yields reflect the short supply of rental stock, high tenant demand and an easing of house prices in recent months.
In this latest barometer, Fleet has included new data including average rates, loan sizes, landlord portfolio numbers and average monthly rental income by region.
Average rental income across the regions Fleet lends in was up to £1,345 from £1,256 in the last quarter of 2022 – a £135 rise annually.
These varied from an average of £660 per month in the North East to £2,049 in Greater London. But not every region saw an increase. While yields topped the table in the North East, average monthly rental income was actually down in the region from £681 last quarter. There were similar trends in the East Midlands and South East.
Gross rental income now exceeds £1,000 in seven out of 10 regions, compared to five regions a year ago.
Fleet Mortgages chief commercial officer Steve Cox comments: “There is perhaps no surprise to see rental yield has increased in every single region in which Fleet lends in England and Wales over the last year, given a combination of factors including lower supply of property, increased tenant demand, house prices falling and product rates rising.
“In terms of mortgage product choice, rates and the like, the mini-Budget still has a lot to answer for, and landlord borrowers are going to be dealing with its consequences for a number of years to come.
“Our feeling is that the future is likely to move back towards a return for two and five-year product demand, and if swap rates continue to move lower this will be cemented in the market, with any ongoing movement providing lenders with more pricing options, leading to better affordability for longer fixed-rate products.”
Overall, the market continues to be the preserve of portfolio landlords, particularly as those with one or two properties struggle to stay profitable given the rise in purchase activity, Cox adds.
While purchase activity has slipped slightly, it still represents a third of Fleet’s business, coming mainly from portfolio players purchasing properties with a long-term investment plan.
