All regions, except two, had seen both an annual and quarterly increase in rental yield
Both annual and quarterly rental yields rose from 6% a year ago and 6.4% in the last quarter of 2022 to 6.5% now, according to buy-to-let specialist lender Fleet Mortgages.
The lender released its latest Buy-to-Let Rental Barometer covering Q1 2023 rental yields across England and Wales.
Fleet said increased yields – the highest on record since its Rental Barometer was first published – reflected both rental stock continuing to be in short supply, very high tenant demand, and house price levels easing over the last six months particularly.
This iteration of the Rental Barometer has revealed that every single region had seen both an annual and quarterly increase in rental yield, except the North West and the South West, which had seen quarterly drops of 0.1% and 0.2% respectively.
The North East of England retained its top regional rental yield figure for the 11th consecutive quarter, up 0.6% on the last quarter, while Yorkshire and Humberside jumped into second place with a yield of 7.7%. Wales was the significant mover, up 1.1% year-on-year and 0.6% quarterly.
Average rental income across the regions where Fleet lends was also up at £1,345 per month from £1,256 in the previous quarter – an annual increase of £135 since the first quarter of last year.
Rental incomes ranged from an average of £660 per month in the North East to £2,049 in Greater London.
Fleet noted that while rental yields were increasing in every region, it had not witnessed an increase in rents in all – for example, in the North East while yields remained above 8%, rents had decreased from £681 last quarter, with similar trends in both the East Midlands and the South East.
Meanwhile, gross rental income has exceeded £1,000 in seven out of 10 regions, whereas a year ago, this was true for only five regions.
“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,” commented Steve Cox (pictured), chief commercial officer at Fleet Mortgages.
“Those regions which have topped the ‘charts’ for some time, continue to perform well, but it is also positive to see all other regions showing stronger yields, and again, it is also not surprising to see rental incomes – on the whole – also on the increase.”
Cox added that in terms of mortgage product choice and rates, the mini-budget still had a lot to answer for, and that landlord borrowers were going to be dealing with its consequences for a number of years to come.
“What we initially saw was a move towards tracker products, but this has fallen significantly over the last six months, and instead there has been a focus on longer-term products, particularly those with higher fees and lower rates, which allow borrowers to get over some of the higher affordability hurdles that have become prevalent,” he shared.
“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.”
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