Gross buy-to-let yields reached 7.22% in the third quarter of 2026, their highest level since early 2011, according to figures from Paragon Bank.
The average yield increased by 0.22 percentage points from 7.00% in the preceding quarter and was 0.28 percentage points above the 6.94% recorded a year earlier.
Paragon’s analysis, based on properties included in its buy-to-let mortgage offer data, indicates that rental returns have continued to improve since 2022, as relatively subdued house price growth has coincided with sustained demand for rental accommodation.
The latest figures also highlight significant differences in returns between regions and property types, with the East Midlands outperforming other parts of the UK and houses in multiple occupation (HMOs) continuing to deliver the highest yields.
EAST MIDLANDS LEADS REGIONAL RANKINGS
The East Midlands recorded an average gross yield of 8.10%, the highest of any region and an increase of 0.55 percentage points both quarterly and annually.
The North East followed closely at 8.02%, while Scotland and the North West recorded average yields of 7.95% and 7.88% respectively.
Greater London remained the lowest-yielding region at 5.79%, reflecting the difference in rental returns between the capital and areas with generally lower property acquisition costs.
Nevertheless, London yields also improved, rising by 0.23 percentage points compared with the second quarter and 0.17 percentage points year-on-year.
HMOS CONTINUE TO OUTPERFORM
Analysis by property type showed that HMOs generated average gross yields of 8.80%, maintaining their position as the strongest-performing category despite a marginal quarterly decline of 0.06 percentage points.
On an annual basis, HMO yields increased by 0.37 percentage points.
Multi-unit blocks produced the next highest returns at 7.36%, followed by flats at 6.66% and terraced houses at 6.46%.
Flats recorded the largest annual increase in yields of any property type, rising by 0.40 percentage points compared with the third quarter of 2025. Multi-unit blocks also saw an improvement, with yields increasing by 0.34 percentage points over the same period.
The results suggest that landlords’ investment returns remain closely linked to both the type of accommodation held and its geographical location, with higher-yielding regions generally offering more affordable property values relative to rental income.
Louisa Sedgwick (pictured), managing director of mortgages at Paragon Bank, 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.
“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.”
