The Fleet Mortgages Buy-to-Let Rental Barometer covering the Q1 2025 period showed that compared to the first quarter of 2024, average rental yields had risen by 0.3% to 7.4% in England and Wales.
This was unchanged from the previous quarter.
Yorkshire and the Humber was the only region to show a yearly drop in the average yield, falling by 0.4% to 8.1%. Despite this fall, yields in the region were the third highest, coming behind the North East and the North West.
Rental yields in the North East had risen by the most and were the strongest compared to any other region, with a 0.8% annual increase to a yield of 9.2%.
The North West reported a 0.5% yearly rise in the average rental yield to 8.4%.
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Average rental yields |
|
|
|
|
Region |
Q1 2024 |
YOY change |
Q1 2025 |
|
North East |
8.4% |
9.2% |
0.8% |
|
North West |
7.9% |
8.4% |
0.5% |
|
Yorkshire and the Humber |
8.5% |
8.1% |
-0.4% |
|
Wales |
7.4% |
7.7% |
0.3% |
|
West Midlands |
7.6% |
7.7% |
0.1% |
|
East Midlands |
6.6% |
7.1% |
0.5% |
|
South West |
6.2% |
6.7% |
0.5% |
|
East Anglia |
6.4% |
6.7% |
0.3% |
|
South East |
6.1% |
6.5% |
0.4% |
|
Greater London |
5.9% |
6% |
0.1% |
|
England and Wales (total) |
7.1% |
7.4% |
0.3% |
Quarterly rental yield drops
Fleet Mortgages found that on a quarterly basis, rental yields had slipped across a number of regions.
Yields in the North East dipped by 0.1%, the South West was down by 0.2%, both Wales and Yorkshire and the Humber were down by 0.5% and the East Midlands declined by 0.6% since the last quarter.
The largest quarterly increase was recorded in the West Midlands, which rose 1.1%, followed by East Anglia, which went up by 0.4%.
Fleet Mortgages said rental yield levels were starting to stabilise from the larger rises seen in 2024. However, it said levels would remain across 5% and 9% in many regions because of the imbalance between tenant demand and rental property supply.
Positive stabilisation in the rental market
Steve Cox, chief commercial officer at Fleet Mortgages, said: “Rental yield levels are showing signs of stabilisation, however they are stabilising at a higher level due to the increases seen across most regions over the course of the last 12 months.
“That remains a real positive for landlords and much can be put down to the continued demand-supply imbalance, the fact rates have been moving downward, and affordability is easier to achieve across the board.
“We, of course, see regional variations across England and Wales, with a number of regions showing a dip in yields quarter-on-quarter, however as mentioned, this has to be set against the context where yields have shown significant increases over the past 12-18 months.”
Landlords still expanding portfolios
Fleet Mortgages found that the highest average rent was in Greater London at £2,185 per month, a 6.3% rise on the last quarter. This was followed by the South East, where the average rental price was £1,575 per month.
Monthly rent in the North East was the most affordable at £739.
Fleet Mortgages said it was still seeing a “high demand” from landlords wanting to add properties to their portfolios, with this accounting for 39% of activity. This was a decline from the 44% of business it accounted for in the previous quarter, which the lender said might be because of the higher stamp duty surcharge of 5%.
Portfolio landlords held an average of nine properties, with more than 55% of applications in Q1 coming from landlords with four or more properties.
The lender said there had been a rise in first-time landlords, up from 11% in Q4 2024 to 14% in Q1 2025.
Fleet Mortgages also analysed product pricing and found rates on its average two-year fixes fell from 4.71% to 4.63%, while average five-year fixed rates rose from 5.11% to 5.15%.
Across its peers, average two-year fixed rates came to 5.16%, down from 5.33%. Meanwhile, average five-year fixed rates also rose from 5.45% to 5.48%.
The average loan size that Fleet Mortgages lent to borrowers rose from quarter to quarter, up from £202,000 to £207,000. The average rental cover at loan origination went from 182% to 190%, which the lender said reflected better monthly rents and affordability.
Activity remains strong
Cox added: “One of the interesting aspects of this barometer is the slight dip we saw in purchase applications through the last three-month period, down from 44% in Q4 2024 to 39% in Q1 this year.
“It is too early to show this as a discernible trend, but we obviously had the increase in stamp duty surcharge announced at last year’s Budget, and we will be tracking whether purchase business dips as a result of the increased taxation costs for landlords in buying property.
“That said, activity levels – in terms of both remortgage and purchase – have remained strong, which suggests landlords do want to add to portfolios, and can sense the strong market for them in terms of tenant demand, and what this means for rental levels and ongoing yield/profitability.
“In terms of product pricing, Fleet continues to outperform our peer group on both two-year and five-year fixed rate pricing, plus we have tracker options as well, which may be popular with those landlord borrowers who anticipate rates may continue to fall over the course of the next year or so.
“Finally, the increase in first-time landlords is also encouraging. Even with the stamp duty costs, and other barriers to entry in terms of ongoing property costs, increased regulation and legislation like the forthcoming Renters’ Rights Bill, it appears property investment retains its allure as long-term asset to hold.”
