Recent data indicates that rental yields across England and Wales have remained resilient despite ongoing market uncertainties and political volatility. While some regions have seen quarterly declines, the overall average rental yield has increased slightly year-on-year, signalling a degree of stability in the buy-to-let sector that landlords and letting agents should note as they plan their portfolios and strategies.
Regional Variations in Rental Yields
The latest Rental Barometer from Fleet Mortgages reveals a mixed picture across different regions. The North East continues to offer the highest rental yields, with an annual increase of 0.5%, although it experienced a modest quarterly decline of 0.6%, bringing the average yield to 9.2%. The North West has overtaken other areas to claim second place, with an average yield of 8.8%. Notably, six regions now report average yields exceeding 8%, including the North East, North West, Yorkshire & Humberside, Wales, and both the East and West Midlands.
These figures highlight a continuing trend where northern and midland regions outperform the South in terms of rental returns. Conversely, Wales and the South West have seen annual declines in yields. Most areas recorded a drop in quarterly yields, with exceptions such as the East Midlands and Greater London, where yields rose by 0.6% and 0.3% respectively, alongside an increase in the North West.
Market Stability Amidst Political and Economic Uncertainty
Political events and global economic factors have contributed to volatility in the mortgage market, affecting funding costs and lender pricing. However, recent weeks have shown signs of stabilisation. Swap rates have eased, and lenders are increasingly able to offer competitive rates and a wider selection of mortgage products. This shift suggests that the market is adapting to what some describe as a ‘new normal’ of periodic volatility rather than sustained disruption.
Fleet Mortgages’ chief commercial officer notes that the Bank of England’s decision to hold the base rate and the containment of inflation have contributed to this improved environment. These factors, combined with a broader range of mortgage options for landlords, are encouraging signs for the buy-to-let sector as it moves into the latter half of the year.
Growth Among Portfolio Landlords
Data also points to increased activity from professional landlords managing larger portfolios. The proportion of mortgage applications from landlords with six to 14 properties rose from 26% in the first quarter to 30% in the second quarter. Additionally, landlords with 15 or more properties accounted for 26% of applications, underscoring the ongoing expansion within this segment.
This trend indicates that portfolio landlords remain active in acquiring properties where viable opportunities exist, often favouring limited company structures for borrowing. Such activity is a positive indicator of confidence in the sector’s underlying strength despite broader economic challenges.
Implications of Market Volatility for Buy-to-Let
Periods of market volatility have become more commonplace, requiring landlords and advisers to be adaptable. When conditions improve, the market tends to respond swiftly, offering borrowers enhanced choices and better pricing. This responsiveness is crucial for landlords planning acquisitions or refinancing, as it can affect affordability and investment returns.
Looking ahead, the market is expected to remain sensitive to economic, political, and geopolitical developments. Landlords and agents should therefore monitor these factors closely and be prepared for potential fluctuations in mortgage availability and rental demand.
What this means for landlords
For landlords, the current environment suggests cautious optimism. While rental yields have held firm on average, regional disparities mean that returns can vary significantly depending on location. Landlords should consider these variations when evaluating prospective investments or managing existing portfolios.
Moreover, the return of greater mortgage market stability may provide more opportunities for refinancing or purchasing additional properties, particularly for portfolio landlords. However, given the ongoing sensitivity to external factors, landlords should maintain flexibility in their financial planning and remain informed about market developments.
What TLA members should consider
- Review regional rental yield data to identify areas offering the best returns relative to risk and market conditions.
- Consider the benefits of limited company structures for borrowing, especially for landlords with multiple properties.
- Stay informed about mortgage market trends and lender product offerings to capitalise on improved rates or terms when available.
- Maintain contingency plans to manage potential fluctuations in funding costs or rental demand due to economic or political changes.
- Utilise professional advice and resources to ensure compliance with evolving landlord obligations and market conditions.
- Engage with TLA training and support to enhance knowledge of market dynamics and landlord best practices.
TLA Training Academy
The Landlord Association provides structured guidance, compliance education and practical support for landlords, letting agents and property professionals. Members can access training and resources designed to help them stay organised, informed and prepared.
Landlords can explore the Academy here: https://landlordassociation.org.uk/tla-academy/
Those looking to join and access member support can register here: https://landlordassociation.org.uk/get-started-with-the-landlord-association/
TLA update
The Landlord Association is continuing to expand its support, resources and partner network for landlords, tenants, agents and property professionals across the UK. Service providers interested in working with TLA can register their interest here: https://landlordassociation.org.uk/become-a-tla-service-partner/
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