Fleet Mortgages’ latest Rental Barometer shows average yields reached 8.1% in Q1 2026, up from 7.4% a year earlier and 0.4% higher than in the previous quarter.

The lender said the figures reflected sustained tenant demand and stronger rental income, particularly in higher-yielding parts of the North and Midlands.

The North East again recorded the highest average yield at 9.8%, up from 9.2% in Q1 2025. Yorkshire and Humberside, the West Midlands and Wales all posted yields of 8.6% or above, while the East Midlands reached 8.0%.

The South West recorded the largest annual increase, with yields rising from 6.7% to 7.8%. In London, yields edged up from 6.0% to 6.1%, while the South East increased from 6.5% to 6.9%.

MARCH VOLATILITY

Fleet said the headline figures should be viewed against a changing market backdrop. While January and February were relatively stable, with mortgage rates easing and affordability improving, conditions shifted in March as global events pushed up swap rates and triggered product withdrawals and repricing across the mortgage market.

The lender said that could test the resilience seen in the first quarter, particularly among landlords considering new purchases. Purchase applications accounted for 33% of total business during Q1, which Fleet said pointed to a more cautious approach even before March’s volatility took hold.

Despite that, the lender said the underlying position in the private rented sector remained supportive. Average monthly rents increased in every region, with the sharpest annual rises recorded in the North East at 33.6% and Yorkshire and Humberside at 31.0%.

Fleet said this continued demand was helping landlords offset higher financing costs. It added that borrower behaviour suggested the market was continuing to tilt towards larger and more experienced operators, with its average loan size rising to £210,000 during the quarter.

More than 63% of applications came from landlords with four or more properties, while those with portfolios of 15 or more accounted for 30% of business. Limited company borrowing represented 78% of all applications, underlining the continued move towards a more professionalised buy-to-let sector.

Steve Cox, chief commercial officer at Fleet Mortgages, said: “The Q1 data paints a positive picture for landlords, with rental yields increasing across every region and average returns now sitting above 8% nationally.

“That reflects the strength of tenant demand and how improved rental income continues to play in supporting landlord returns.”

He said: “However, it is important to recognise that much of this data reflects the first two months of the quarter, when conditions were more stable and mortgage pricing was easing.

“The market we are operating in now looks quite different following a continuation of the volatility we saw from March.”

Cox said: “The increase in swap rates and the resulting changes to product availability and pricing are likely to have an impact on landlord activity, particularly when it comes to new purchases.

“We have already seen some signs of a more cautious approach, and that may continue in the short term.”

He added: “That said, the fundamentals of the UK private rental sector remain strong. Demand from tenants is not going away, yields are holding up well, and landlords should continue to take a long-term view of their investments.”

“As we move through Q2, it will be important to see how these recent market changes feed through into activity and sentiment, but the sector remains well supported even as it adjusts to a more uncertain environment.”