Flats and terraced homes drive buy to let yield gains in 2025

Flats and terraced properties delivered the strongest increases in gross rental yields during 2025, with Wales and the North East leading regional performance.

That’s according to lending data from Paragon Bank, which found that gross yields on flats ended the year at 6.33%, up 0.24 percentage points on the same point a year earlier.

Terraced homes followed closely, rising 0.23pp to 6.28%.

Houses in Multiple Occupation continued to generate the highest returns overall, finishing 2025 at 8.61%, an annual increase of 0.20pp.

Yields perform well

Paragon’s managing director of mortgages, Louisa Sedgwick, said: “Yields have performed strongly since summer 2022, when house price growth began to slow and rental inflation accelerated due to the imbalance between supply and demand.

“While we saw this momentum ease last year as the market normalised, we expect yields to remain stable throughout this year.”

She added: “Although overall yield growth was relatively flat in 2025, certain property types and regions stood out, reflecting varied local market conditions and shifting demand for specific kinds of homes.”

Wales delivers best yield

The data comes from Paragon’s Q4 2025 Buy to Let Yields report, which shows that Wales recorded the sharpest regional rise.

Average yields there climbed 0.74pp over the year to 8.83%.

The North East was next, increasing 0.38pp to 8.20%, while Greater London also posted a notable improvement, up 0.30pp to 5.78%.

Despite these pockets of growth, yields across the UK as a whole were broadly unchanged.

Average returns finished Q4 at 6.93%, closely matching Q4 2024 at 6.94% and Q3 2025 at 6.95%.