Scotland, the West Midlands and Yorkshire and the Humber were the main drivers of the growth.
Yields have been on an upward trajectory since the end of the Covid lockdowns, rising from 5.84% in 2021.
Regional performance
Scotland recorded the strongest growth in yield performance over the quarter, rising by 53 percentage points (pp) to 7.97%.
The West Midlands saw a 24pp increase to 7.24%, while Yorkshire and the Humber rose by 21pp to 7.58%.
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Scotland’s sharp rise moved it into joint second place nationally alongside the North East, both now yielding 7.97%.
Wales retained its position as the UK’s strongest yielding region at 8.87%.
At the other end of the scale, Greater London saw the sharpest decline of any region, with yields falling 16pp to 5.58% over the quarter. Along with the South East, at 6.48%, London remained the lowest yielding region in the UK.
HMOs remain the standout performer
By property type, houses in multiple occupation (HMOs) remained by far the highest yielding investment, delivering 8.9%, up 14pp on the previous quarter.
Multi-unit blocks (MUBs) followed at 7.18%, with flats at 6.45% and terraced housing at 6.31% also outperforming other property types.
Louisa Sedgwick, managing director of mortgages at Paragon Bank, said: “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.”
She added: “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.”
