Average gross rental yields across Paragon Bank’s landlord lending book rose to 7.02 percent in the second quarter of 2026, with HMOs again delivering the strongest returns at 8.9 percent. The latest figures put overall landlord yields above the 7 percent mark after a rise from 6.96 percent in the first quarter.
The new data sharpens the picture in two ways. First, the quarterly gain was small at headline level, which suggests yield growth is still being driven by specific property types and regions rather than a broad-based jump across the market. Second, Greater London moved the other way, with yields falling to 5.58 percent even as Scotland, the West Midlands and Yorkshire and Humber posted stronger gains.
For landlords, that matters now because a yield headline above 7 percent looks healthy, but it does not mean every part of the market is getting easier. Investors chasing stronger income are still being pulled towards HMOs and lower-priced regional stock, while landlords in pricier southern markets may find capital values and borrowing costs are still holding back returns.
HMOs stay ahead as specialist stock keeps its edge
Paragon’s figures show HMOs remained the highest-yielding property type in the quarter at 8.9 percent, up 0.14 percentage points from the first quarter. Multi-unit blocks followed at 7.18 percent, while flats averaged 6.45 percent and terraced houses 6.31 percent.
That matters because it supports a pattern already visible across the specialist market: landlords willing to take on more hands-on stock are still being paid more for the extra complexity. HMOs bring heavier management, licensing and compliance work, but the income gap over standard single-let property remains hard to ignore.
This follows Landlord Knowledge’s earlier coverage of Fleet’s finding that professional landlord yields hit 7.8 percent. The latest Paragon figures suggest the search for income has not eased, but the best returns are still concentrated in specialist property and selected regions rather than spread evenly across the market.
Regional gains mask a weaker London picture
Regionally, Scotland recorded the biggest quarterly improvement, with average yields rising by 0.53 percentage points to 7.97 percent. The West Midlands rose to 7.24 percent and Yorkshire and Humber to 7.58 percent. Wales kept the highest regional yield overall at 8.87 percent.
London was the outlier in the opposite direction. Yields in Greater London fell by 0.16 percentage points to 5.58 percent, leaving the capital at the bottom of Paragon’s regional table alongside the South East, where average yields stood at 6.48 percent.
For landlords weighing their next move, that split is the real story. A national average above 7 percent may help sentiment, but buying decisions still turn on local pricing, local rents and the type of stock being targeted. That lines up with recent Landlord Knowledge reporting on London’s yield gap, which found the capital was improving against some regions but still lagging better-value markets.
Returns are improving, but not everywhere
Louisa Sedgwick, managing director of mortgages at Paragon Bank, said the second quarter brought a further strengthening in gross rental yields and pointed to sustained tenant demand alongside more subdued house price growth in parts of the market.
For landlords, the more useful reading is that yield growth is still selective. Areas with lower entry prices and stronger rental demand are doing more of the work, while lower-yielding southern markets remain exposed if rent growth cools or finance costs stay higher for longer.
The data sits alongside Paragon’s wider specialist buy-to-let focus, including HMOs and multi-unit blocks, on the lender’s mortgages platform.
What this means for landlords
- If you’re comparing regions: do not treat the 7.02 percent headline as a universal market rate – London and the South East are still well below that level.
- If you’re considering HMOs: the yield premium remains strong, but so do the management and compliance demands.
- Watch for: whether more landlords shift towards specialist stock if standard single-lets cannot match income targets.
- Bottom line: returns are improving, but the best-performing parts of the market are still specialist and regional rather than mainstream.
Editor’s view
Crossing the 7 percent line makes a neat headline, but landlords should look past the average. The sharper takeaway is that HMOs and lower-cost regions are still doing most of the heavy lifting, while London remains a much tougher income story.
Author: Editorial Team – UK landlord & buy-to-let news, policy, and finance
Published: 22 July 2026
Sources: Paragon Bank
Related reading: Fleet says rental yields hit 7.8% as landlord buying holds up
