The average rental yield across England and Wales now stands at 7.4% – an annual increase of 0.3% compared to the same period in 2024, according to Fleet Mortgages latest Buy-to-Let Rental Barometer.

Fleet reports that rental yields remain largely positive, with Yorkshire and Humberside being the only region to see a slight year-on-year decline of 0.4%.

Meanwhile, some areas experienced minor quarterly decreases, including the North East (-0.1%), South West (-0.2%), Wales and Yorkshire and Humberside (-0.5% each), and the East Midlands (-0.6%).

Despite the minor dip, the North East continues to lead the way with the highest average rental yield at 9.2%, followed by the North West at 8.4% and Yorkshire & Humberside at 8.1%. The standout performer this quarter was the West Midlands, which recorded a 1.1% increase in rental yields, followed by East Anglia, which rose by 0.4%.

TENANT DEMAND

Fleet attributes this continued strength in rental yields to the persistent demand-supply imbalance in the rental market. With rental property availability remaining constrained, tenant demand continues to push rental prices upward.

The highest average monthly rent was recorded in Greater London at £2,185 – a quarterly increase of 6.3% – followed by the South East at £1,575. The North East remains the most affordable region, with an average monthly rent of £739.

MARKET TRENDS

Landlord sentiment remains strong, with 39% of landlords indicating plans to expand their portfolios, though this marks a slight decline from 44% in the previous quarter. Fleet suggests that the recent increase in the stamp duty surcharge—from 3% to 5%—may be influencing purchasing decisions.

The average landlord portfolio size remains at nine properties, with 55% of applications coming from landlords holding four or more properties. Encouragingly, first-time landlord applications have risen from 11% in Q4 2024 to 14% in Q1 2025, signaling continued interest in property investment despite market challenges.

Average loan sizes continued to grow, rising from £202k to £207k, with rental coverage at loan origination improving from 182% to 190%, driven by higher rental incomes.

POSITIVE FOR LANDLORDS

Steve Cox, chief commercial officer at Fleet Mortgages, said: “Rental yields are stabilising at an elevated level following the significant increases of the past year. This is a positive sign for landlords, underpinned by strong tenant demand and easing affordability due to falling interest rates.

“While we are seeing some regional variations, rental yields remain robust overall. A slight dip in landlord purchase applications this quarter may be linked to the recent stamp duty surcharge increase. We’ll be monitoring whether this trend continues.

RENTERS’ RIGHTS BILL

And he added: “Landlords continue to see value in expanding their portfolios, and first-time landlord activity is on the rise. Fleet also remains competitive on mortgage pricing, particularly on two-year and five-year fixed-rate products, making it an attractive choice for investors.”

 “Even with regulatory changes like the upcoming Renters’ Rights Bill, property investment remains a compelling long-term asset. The fundamentals of strong rental demand and limited housing supply continue to drive a resilient market.”