Landlord gross rental yields strengthened during the second quarter, driven by growth in Scotland, the West Midlands and Yorkshire and the Humber, according to Paragon Bank.

The lender’s Q2 2026 Buy-to-Let Yields report showed the average gross rental yield increased to 7.02% at the end of June, up from 6.96% in the first quarter.

Yields have followed an upward trajectory since the end of the Covid lockdowns, rising from 5.84% in 2021.

Scotland recorded the strongest quarterly improvement, with average yields increasing by 53 basis points to 7.97%. The West Midlands saw a 24-basis-point rise to 7.24%, while yields in Yorkshire and the Humber increased by 21 basis points to 7.58%.

Greater London experienced the sharpest decline, with yields falling by 16 basis points during the quarter to 5.58%.

Wales retained its position as the UK’s highest-yielding region at 8.87%. Scotland’s improvement moved it into joint second place with the North East, where landlords also achieved an average yield of 7.97%.

London and the South East remained the lowest-yielding regions, at 5.58% and 6.48% respectively.

By property type, houses in multiple occupation remained the strongest performers. Average HMO yields increased by 14 basis points to 8.90%, followed by multi-unit blocks at 7.18%.

Flats produced an average gross yield of 6.45%, with terraced homes returning 6.31%.

RESILIENT LANDLORD RETURNS

Louisa Sedgwick (main picture), managing director of mortgages at Paragon Bank, said: “The second quarter saw a further strengthening in gross rental yields, continuing the positive trajectory we have seen in recent years.

“While the pace of movement varies across regions, the overall picture remains one of resilient returns for landlords, supported by sustained tenant demand and more subdued house price growth in parts of the market.

“Wales continues to lead the regional yield table, while Scotland, the West Midlands and Yorkshire and Humber all recorded notable quarterly improvements.

“HMOs also remain the highest-yielding property type, underlining the importance of more specialist rental accommodation in delivering stronger income returns for landlords where there is clear local demand.”