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Rental yields show promising stability across England and Wales

Rental yields across England and Wales are displaying encouraging stability, with the average yield reaching 7.4% in the first quarter of 2025, up from 7.1% in the same period last year. Despite a slight cooling in certain regions, landlords continue to benefit from robust tenant demand and an enduringly positive market environment.

The latest data from Fleet Mortgages’ Rental Barometer highlights an overall trend of consistency, with regional variations offering valuable insights into the broader rental landscape.

Strong returns in the North
According to Fleet’s findings, the North East leads the rental yield table with a solid 9.2% average yield – an impressive 0.8% increase compared to the same quarter in 2024. The North West follows closely with yields of 8.4%, while Yorkshire & Humberside recorded a slight decline to 8.1% from its previous high of 8.5%.

Steve Cox, Chief Commercial Officer at Fleet Mortgages, commented on the findings: “Rental yield levels are showing signs of stabilisation, however they are stabilising at a higher level due to the increases seen across most regions over the course of the last 12 months.”

The West Midlands emerged as the standout performer, experiencing a 1.1% quarter-on-quarter increase to reach 7.7%, making it one of the most attractive regions for landlords currently seeking to expand their portfolios.

Rental market fundamentals remain positive
Despite minor quarterly dips in some areas, the overall picture remains promising for landlords. Fleet Mortgages noted that 39% of applications received in Q1 2025 were from landlords looking to expand their portfolios, albeit down slightly from 44% in the previous quarter.

Cox acknowledged the impact of the government’s stamp duty surcharge increase from 3% to 5%, but remained optimistic: “It is too early to show this as a discernible trend, but we obviously had the increase in stamp duty surcharge announced at last year’s Budget. Activity levels – in terms of both remortgage and purchase – have remained strong.”

Additionally, Greater London continues to command the highest average monthly rent per property at £2,185 – a 6.3% quarterly increase. This underscores the enduring appeal of London’s rental market, even with higher property prices and operational costs for landlords.

First-time landlords enter the market
In a surprising development, the number of first-time landlords entering the market has risen from 11% in Q4 2024 to 14% in Q1 2025. This growth suggests that property investment remains attractive despite additional costs and increasing regulation.

Cox pointed out: “Even with the stamp duty costs, and other barriers to entry in terms of ongoing property costs, increased regulation and legislation like the forthcoming Renters’ Rights Bill, it appears property investment retains its allure as a long-term asset to hold.”

The bigger picture
While the North East continues to excel, the South East and Greater London remain lucrative markets for landlords, driven by high demand and premium rental rates. Landlords should remain encouraged by the steady demand for rental properties, particularly in regions that offer attractive yields coupled with competitive property prices.

Furthermore, Fleet Mortgages continues to offer highly competitive product pricing, with average two-year fixed-rate products dropping from 4.71% to 4.63%. This remains below the peer group average of 5.16%.

As the rental market continues to stabilise, landlords are well-positioned to make strategic investments and capitalise on the ongoing demand-supply imbalance. The slight decline in purchase applications may be more of a temporary reaction to recent stamp duty changes rather than a long-term trend.

 

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