Landlord’s buy-to-let yields on the rise says big lender

Landlords’ yields rose again in the third quarter of this year according to buy-to-let mortgage specialist Paragon Bank, continuing their strong recent performance.

The bank’s mortgage application data shows the average yield hit 6.72% in September, up from 6.69% at the end of the second quarter of 2024 and 6.48% a year previously.

Strengthening

Yields have been strengthening since the summer of 2022 as house price inflation has stabilised and rents have increased as a result of the growing disparity between supply and demand for rental stock.

Houses in Multiple Occupation generated the highest yields at 8.34%, followed by freehold blocks at 6.66%. Flats and terraced houses achieved slightly lower yields of 6.02% and 5.94% respectively.

And landlords in the North of England achieved the highest regional yields, at 8.02%, followed by Wales at 7.95%. Landlords in Greater London achieved the lowest yields at 5.52%.

Yield performance has been improving over the past 18 months.”

Paragon Bank Mortgages Commercial Director Russell Anderson said: “Yield performance has been improving over the past 18 months as house price inflation moderated, but the strong demand for rental property drove rental prices higher.

“We typically see higher yields achieved by more complex buy-to-let propositions, but strong yields can also be achieved on more basic property types, such as flats and terraced homes.”

He added: “This data is based on offers, so you would expect yield performance to be even better on existing property in landlords’ portfolios, which would have benefited from a longer period of both house price and rental value growth since acquisition.

“Yields are also only one part of the story; the landlord’s specific return on investment will be based on a number of factors, including how they have financed the property, capital gains and also any improvements they make.”