"The requirements for an ongoing strong yield are clearly not going away, particularly in a higher interest-rate environment in which many refinancing landlord borrowers are having to pay far more for their monthly mortgages than they did two/three/five years ago"
- Steve Cox - Fleet Mortgages
Fleet Mortgages has released the latest iteration of its Buy-to-Let Rental Barometer covering Q2 2024 rental yields across England and Wales.
The regional snapshot covers all areas of England and Wales in which Fleet lends and highlights the rental yield changes that have occurred in each of those regions. In this iteration, the yearly comparison is between Q2 2024 and Q2 2023.
The total average yield for England and Wales shows an annual increase again, up 1% % to 7.6% on the same quarter in 2023. This is also up 0.5% on the Q1 2024 figure of 7.1%.
Fleet said strengthening yields right across every region of England and Wales was evident with all showing year-on-year yield increases and the North East achieving a double-digit yield in the second quarter of this year.
This iteration of the Rental Barometer does show some movement amongst the regions though with Yorkshire and Humberside losing the top spot, falling to fifth place with an average yield of 7.6%, down from 8.5% last quarter.
This means the North East moves top, in front of the North West, while both Wales and the West Midlands jump ahead of Yorkshire and Humberside.
There still remains an ongoing North/South divide with regions in the North topping the table. However, Greater London, the South East, East Anglia, and the South West have not just seen yearly average yields increase but also quarter-on-quarter.
When it comes to average monthly rent per property, the highest is generated within Greater London at £2,024, followed by East Anglia at £1,594; properties located in the North East region typically see the most affordable rents, with monthly pricing of, on average, £768.
Fleet said the increase in both yearly and quarterly average rental yields was no surprise in a market where tenant demand continued to outstrip the supply of properties by some distance.
It said while rental yields were likely to dip off these highs eventually, they would be sustained until the private rental sector could benefit from a greater number of homes to meet key demographic issues, particularly the population increase but also the increased difficulties many people face when seeking to buy a home.
Steve Cox, Chief Commercial Officer at Fleet Mortgages, commented: “While there are few surprises within this iteration of the Rental Barometer, it’s clear the trends we have all been seeing in the wider buy-to-let and private rental sector continue to strengthen right across the board, fuelled by a continued supply/demand imbalance.
“Hence we have every single region within which Fleet lends in England and Wales showing a year-on-year increase in average rental yields, pushing the total figure to 7.6% - a 1% increase on a year ago.
“The requirements for an ongoing strong yield are clearly not going away, particularly in a higher interest-rate environment in which many refinancing landlord borrowers are having to pay far more for their monthly mortgages than they did two/three/five years ago.
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“When it comes to mortgage pricing, it showed a clearly increase in quarter two, however with inflation now down to target, once we have the General Election out of the way, we would anticipate a Base Rate cut in either August or September and swap rates will move to reflect further cuts in the not so near future.
“There is further good news in this Barometer with an increase in purchase applications – a signal that landlords are seeking to add to portfolios, and with the average rental cover at origination also rising, it shows that borrowers continue to secure the rents they need to cover both their mortgage and other costs.
“Again, it won’t be surprising to see limited company borrowers continuing to dominate, given the tax relief that can still be secured within a corporate structure. That is a trend that will continue for many years to come.
“Overall, these latest figures are positive, and they signal further activity in the second half of the year, particularly if – as we are already seeing – pricing continues to move down. We at Fleet have already been able to make some price reductions and our expectation is that we will continue to move further in this direction later in 2024.”
