Average rental yields in England Wales have increased by 1% in Q3 to 6.9%, new research from Fleet Mortgages has indicated.

Latest yields are also up 0.6% on the Q2 2023 figure of 6.3%, the buy-to-let (BTL) specialist lender reported.

Fleet’s latest iteration of its BTL Rental Barometer, which covers all areas of England and Wales in which Fleet lends, highlighted the rental yield changes that have occurred in each of those regions.

According to the lender, the same underlying factors have continued to drive rental yields, namely an increased demand from tenants, a shortage of available supply, plus a continued dip in house price levels.

For the second quarter in a row, annual yields had increased across every single region, with a 1%-plus increase in three regions – West Midlands, East Anglia and the South East.

Quarter-on-quarter changes were also positive in the North East, Yorkshire & Humberside, West Midlands, South West, East Anglia, South East and Greater London, while the only quarter-on-quarter dips were seen in the North West and Wales.

Furthermore, the average monthly rent across the regions where Fleet lends was slightly down from £1,380 per month in Q2, to £1,346 per month in this quarter. Rental prices ranged from an average of £678 per month in the North East, to £2,457 in Greater London.

Chief commercial officer at Fleet Mortgages, Steve Cox, commented: “With house prices having dipped across the country, the yield figures are strengthening, while property availability compared to tenant demand is pushing monthly rents up in the vast majority of regions, although the Northern regions have seen a dip this month.

“The outlook, at least for the short-term, looks likely to be very similar, particularly in regions like Greater London, the South West and the South East where a shortage of stock is inevitably leading to higher rental prices.

“While portfolio landlords in particular continue to look for opportunities to purchase more property, those with a smaller private rental sector investment are finding it difficult to make the numbers work.”

He added: “More adjustments will be forthcoming if the rate environment continues to be calmer, and if product pricing can move more towards an average 5% rate, then we anticipate business levels will improve as landlords are better able to meet the affordability criteria that comes with today’s marketplace.”

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