Rental yields for landlords in the UK have reached their highest level since 2011, according to new data from buy-to-let mortgage lender Paragon Bank.
The figures show that average rental yields hit 6.93% in December 2024, the highest level recorded since February 2011, when yields stood at 7.12%. The latest increase represents a rise from 6.72% in Q3 2024 and a 30 basis point (bps) increase compared to the same period in 2023.
RENTAL YIELDS CONTINUE UPWARD TREND
The data, based on Paragon Bank’s buy-to-let mortgage offer records for purchases and remortgages, confirms a continued rise in yields since mid-2022. This has been driven by stable house prices and rising rents, as demand for privately rented homes continues to outstrip supply.
REGIONAL RENTAL YIELD PERFORMANCE
At a regional level, the highest rental yields were recorded in:
- Wales – 8.09%
- North West – 7.84%
- South West – 7.75%
In contrast, Greater London landlords saw the lowest yields at 5.48%, reflecting the higher cost of property in the capital.
COMPLEX PROPERTY TYPES DELIVER STRONGEST RETURNS
Certain buy-to-let property types consistently generated higher rental yields:
- Houses in Multiple Occupation (HMOs) – 8.40% (highest yields)
- Freehold blocks – 7.28%
- Flats – 6.09%
- Terraced houses – 6.05%
Russell Anderson, commercial director at Paragon Bank, emphasised that the figures demonstrate a healthy buy-to-let market despite some negative perceptions: “A 13-year high in average rental yields is evidence of the market being in much better health than some would have you believe.
“Where landlords invest strategically, purchasing in areas where homes are relatively affordable and targeting more complex property types, buy-to-let delivers strong returns.
“A key component of this is demand, something that has outstripped the supply of privately rented homes for some time. This has caused market rents to rise which, in turn, has helped to sustain strong yields despite house price inflation.”
Anderson also highlighted that rental yields alone do not provide a full picture of buy-to-let returns: “While yields are a good indicator of the regular income that landlords will typically see, to get a complete picture of the returns an investment property can generate, we must also take into account aspects such as how they are financed, capital gains, landlord deposit and any improvements that have been made.”
