Flats and terraced homes achieved the highest growth in gross rental yields during 2025, according to new figures from Paragon Bank.

The lender’s Q4 2025 Buy-to-Let Yields report shows that gross yields on flats rose by 0.24 percentage points over the year to 6.33%, with terraced homes close behind, increasing by 0.23 percentage points to 6.28%.

Houses in Multiple Occupation continued to generate the strongest returns overall, with yields reaching 8.61% at the end of the year, up 0.20 percentage points on 2024.

Despite these pockets of growth, average yields across the UK remained broadly stable. Overall yields finished Q4 at 6.93%, in line with both the same period in 2024, when yields stood at 6.94%, and Q3 2025, at 6.95%.

Regionally, Wales recorded the strongest increase in yields, rising by 0.74 percentage points over the year to 8.83%. The North East also performed well, with yields increasing by 0.38 percentage points to 8.20%. Greater London saw more modest but still notable growth, with yields up 0.30 percentage points to 5.78%.

In terms of property type, multi-unit blocks delivered the second highest yields after HMOs, averaging 7.32% in Q4. Flats and terraced homes followed closely behind. Wales remained the highest yielding region overall, followed by the North West at 7.80%, the East Midlands at 7.69% and Yorkshire & Humber at 7.68%.

Louisa Sedgwick, managing director of mortgages at Paragon Bank, 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.”