Rental yields for landlords across England and Wales increased to 6.5% in the first quarter of 2023, new data published by Fleet Mortgages has indicated.

This level is up from 6.4% in the previous quarter, as well as up from 6% in Q1 last year.

The lender suggested that increased yields across all regions reflected both rental stock continuing to be in short supply, high tenant demand, and house price levels easing over the last six months particularly.

As a result, every region across the UK had seen both an annual and quarterly increase in rental yield, except the North West and the South West, which had seen quarterly drops of 0.1% and 0.2% respectively.

The North East of England continued to retain its top regional rental yield figure for the eleventh quarter running, up 0.6% on the last quarter, while Yorkshire and Humberside had climbed into second place with a yield of 7.7%. Fleet’s data also showed that Wales was the significant mover, up 1.1% annually and 0.6% quarter-on-quarter.

“Those regions which have topped the ‘charts’ for some time, continue to perform well but it is also positive to see all other regions showing stronger yields and again it is also not surprising to see rental incomes – on the whole – also on the increase,” said chief commercial officer at Fleet Mortgages, Steve Cox.

“In terms of mortgage product choice, rates and the like, the mini-Budget still has a lot to answer for, and landlord borrowers are going to be dealing with its consequences for a number of years to come.

“What we initially saw was a move towards tracker products, but this has fallen significantly over the last six months, and instead there has been a focus on longer-term products, particularly those with higher fees and lower rates, which allow borrowers to get over some of the higher affordability hurdles that have become prevalent.

“Our feeling is that the future is likely to move back towards a return for two and five-year product demand, and if swap rates continue to move lower this will be cemented in the market, with any ongoing movement providing lenders with more pricing options, leading to better affordability for longer fixed-rate products.”

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