A new monthly buy-to-let index indicates the steady downward trend on yields has been reversed in the first quarter of this year. Paragon Mortgages research shows that average national yields rose to 7.99% last month, from a low in January of 7.91%. The highest yields are in Yorkshire and the North, at 9.83% and 9.82% respectively. The lowest yields are in the South, due mainly to high property prices. Greater London average yields are 6.95%, with the rest of the South East at 7.38%.
John Heron, managing director of Paragon Mortgages, said: ‘The rise of property values has meant we have seen a steady decline in rental yields over 2002, however, landlords have made a substantial capital gain on their investment properties over this time.’ He pointed out that landlords are currently able to make good deals with the cooling of the property boom. The average price paid for new purchases in March this year was £109,424.
Taking property value increases into account and despite lower yields, Greater London still gave the greatest overall return at 41.7% over the past year, followed by the East Midlands at 39.6%. Over the year, rental yields have held up nationally, rising 2.48%, and average annual rental income stands at £8,745.
The new index tracks yields, property values and rentals and is based on the lender’s data covering 18,000 buy-to-let mortgages annually. The figures are weighted by region and property type, but have no seasonal adjustment. Heron said: ‘The survey focuses on the two main variables landlords are concerned with, price paid and rent returned. The sample size for the survey is large compared to most surveys and there has been no similar survey since the Joseph Roundtree Foundation stopped collating figures two years ago.’
Paragon has also released the results of its Financial Adviser Confidence Tracking Index. It indicated a quarterly 14% fall in the number of mortgages signed, with remortgages accounting for 52% of all mortgages. However, adviser confidence remains high with introducers expecting a growth in business over the next quarter of 5.7%. Only 6.4% of advisers thought the contraction in the market would continue.