Annual rental yields in England and Wales have fallen to 5.5% from 6.1% a year ago, according to new data published by Fleet Mortgages.

The buy-to-let (BTL) specialist lender also revealed that the drop is 0.2% down on the previous three-month period, when yields stood at 5.7% in Q1 2022.

The latest iteration of Fleet’s BTL Rental Barometer covered Q2 2022 rental yields across England and Wales, highlighting the rental yield changes that have occurred in each region. This showed the yearly trend across all regions was down, with every area of England and Wales seeing a drop in rental yields of somewhere between 0.1% and 0.9%.

However, a more recent quarterly comparison with Q1 2022 showed that two regions, Wales and the East Midlands, have seen rental yields increase, and that three regions – the North West, West Midlands, and the South West – have seen no change. Five regions have also shown drops of 0.6% and below.

Fleet said that while rental yields had dropped off the recent highs of the last 12 months, it was apparent that strong tenant demand – coupled with a relatively low level of supply – were likely to keep yields at “good levels”.

“This is, without doubt, a very interesting period for landlords, lenders, and the wider private rental sector, as we seek to marry up a number of ongoing issues which are all having an impact,” commented Fleet chief commercial officer, Steve Cox.

“The positive news is that yields are holding up well, and while we have seen a drop-off since the highs of last year, in general there has been a consistency across most regions on a quarterly basis.

“That clearly has much to do with strong tenant demand, married up with relatively low levels of supply. Properties are highly sought after, and rents are strong due to the scarcity value of quality homes. Our anticipation is that, in most regions of the UK, yields will stay pretty constant especially while this supply-demand imbalance is in place.”

Cox added: “There may also be an element of landlords holding off any purchase ambitions as they await to see how house prices in the UK react to the double-whammy of the cost of living increases and more expensive mortgages. A number of economists anticipate this will see house prices dropping off their highs, which might present a better opportunity for acquisitive landlords.”

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