Rental yields across England and Wales increased to 6.2% in the fourth quarter of 2022, new data published by Fleet Mortgages has indicated.

This is up from 5.9% in Q4 a year earlier, and up from 5.4% in Q3 2022.

The figures were released under Fleet’s latest Buy-to-Let (BTL) Rental Barometer, which 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.

According to the latest iteration, the BTL specialist lender said the figure reflected increased rental yields in six out of 10 regions, with two others maintaining their yields of a year ago, and eight of 10 regions showing a quarterly increase. Only Wales and the West Midlands had not improved on their yields of Q3 last year.

Fleet suggested that a continued shortage of private rental sector (PRS) supply, set against the backdrop of significant tenant demand, has driven rents higher, with landlords having to factor in higher mortgage costs.

“For the first time in well over a year we can see the vast majority of regions in England and Wales returning a significant annual and quarterly increase in rental yield levels, set against the backdrop of a PRS which is woefully short of the supply required to meet tenant demand,” commented chief commercial officer at Fleet Mortgages, Steve Cox.

“However, the supply-demand imbalance in the PRS will have been exacerbated by the fallout from the ‘mini-Budget’, and the higher rates it brought in, although we are pleased to see BTL mortgage rates have been on a downward trend in recent months.”

While BTL mortgage rates had continued to track lower in recent weeks, Fleet stated that remortgaging landlords were likely to be paying more for their finance and this was likely to translate into the need for higher rents in order to cover these increases.

The lender has suggested that yields could therefore fall back slightly but would remain strong because of the supply-demand imbalance in the PRS, which it described “unlikely” to be resolved in the short or medium-term.

Cox added: “The cost of mortgage finance has still increased over the period though, and this may well have resulted in a number of landlords – particularly those with just one or two properties – deciding to sell up.

“It all adds up to a situation where some landlords are being forced to leave, some landlords are contemplating their future against a backdrop of increased costs, some landlords want to buy but supply of homes to purchase is low, and where overall there is clearly not enough properties for the tenant demand that exists and is growing.”

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