Buy to let yields reach highest level since 2011

Landlords’ average gross buy to let yields have reached their highest level since 2011.

Paragon Bank’s mortgage offer data put the average at 7.22% in this year’s third quarter.

That was up from 7% in the previous quarter and 6.94% a year earlier.

The bank attributed the increases seen since 2022 to subdued house price growth and continued demand for privately rented homes.

Property values and rents

Louisa Sedgwick, Paragon’s managing director of mortgages, said: “Buy to let yields reaching their highest level since 2011 demonstrates the attractive returns that well-managed rental property can continue to generate.

“The increase reflects the balance between property values and rental income, with more subdued house price growth combining with strong demand for rented homes across many parts of the country.”

She added: “The regional figures also show why landlords carefully consider local market conditions when investing.

“Areas with more affordable property values and sustained tenant demand can offer particularly attractive yields, as we see in the East Midlands and across the north of England.”

East Midlands leads

Landlords purchasing or remortgaging in the East Midlands recorded the highest regional average yield at 8.10%.

The region’s figure was 0.55 percentage points higher than both the previous quarter and the same period last year.

Next came the North East at 8.02%, followed by Scotland at 7.95% and the North West at 7.88%.

Greater London remained at the bottom with 5.79%, although its average rose by 0.23 percentage points over the quarter.

HMO yields remain highest

Houses in multiple occupation generated the highest average yield by property type at 8.80%, down slightly on the previous quarter but up on a year earlier.

Multi-unit blocks followed at 7.36%, ahead of flats at 6.66% and terraced homes at 6.46%.

Flats recorded the strongest annual increase among the property types analysed, rising by 0.40 percentage points.

At the other end of the table, detached homes produced an average yield of 4.77%, below bungalows at 5.23% and semi-detached properties at 5.75%.