BM Solutions has reported that 88% of landlords have made a profit in in quarter three from their lettings activity, up by 2% from the previous quarter.

The quarterly BM Solutions/ BVA BDRC Landlords Panel found that active landlords haven’t experienced any increased financial difficulty this quarter, with the overall landlord profitability index reaching an historic high of +85.

Landlords are feeling slightly more upbeat when it comes to the near-term prospects for rental yields, the UK private rental sector and their own letting business compared to Q3 last year.

However, they are feeling less confident year-on-year when it comes to the prospect of capital gains and the UK financial markets. Landlord confidence in their own letting business remains 7% above the historic low of 36% recorded in Q2 2017.

Phil Rickards, head of BM Solutions, said: “Despite many recent challenges to the buy-to-let market, it’s encouraging that more landlords have made a profit from their buy-to-let properties this quarter, and that landlords are feeling slightly more upbeat when it comes to the near-term prospects for rental yields, the UK Private Rental Sector (PRS) and their own letting business compared to Q3 last year.

“For those speculating about the future of buy-to-let, the figures supporting tenant demand should help to dispel this myth. Considering the much talked about shortage of housing supply, it is vital that we continue to support a healthy Private Rented Sector and with tenant demand scores improving, or remaining stable across all UK regions, it is clear that the PRS still has a very important part to play.”

The average rental yield dropped this quarter from 6.2% to 5.9%. This follows the 0.4% rise recorded in Q2, when average rental yields were at their highest point since Q4 2014.

Landlords operating in the North West and Wales are currently generating the highest yields at 6.7% and 6.3% respectively. Rental yields are the lowest in Central London (5.3%) and Scotland (4.7%).

Tenant demand has increased to the highest level recorded since Q2 2017, but there are regional variations. The proportion of landlords reporting a drop in tenant demand is now at its lowest point since the end of 2016, falling 8% from last quarter. Unsurprisingly, Central London has seen a 9% rise in the proportion reporting increasing demand for rental properties, and a 14% fall in the number of landlords who feel that demand has decreased in the last three months.

A third of landlords raised rents over the past 12 months, representing a slight increase from quarter two. There has also been an increase in the proportion planning to increase rents in the next six months, reaching 27% from 24%, whilst there has been a fall of only 4% in landlords planning to reduce rents. More landlords are also seeing rents rising in the areas where they let properties, with an increase of 9% from quarter two.

82% of landlords expect their mortgage provider to increase their mortgage interest rate due to recent base rate rises.