Rental yields rise despite Renters Rights Act impact

Rental yields rise despite Renters Rights Act impact

Average rental yields across England and Wales increased to 7.9% in Q3 2026, showing growth despite the introduction of the Renters Rights Act. Regional variations persist, with Yorkshire & Humberside leading yields at 9.3%.

Recent data from Fleet Mortgages’ Buy-to-Let Rental Barometer reveals that average annual rental yields in England and Wales rose from 7.5% in Q3 2025 to 7.9% in Q3 2026. This increase comes amid ongoing changes in tenancy law, including the Renters Rights Act, which has introduced new protections for tenants and altered landlord obligations.

The report highlights that while demand for new buy-to-let mortgages has softened slightly, professional landlords continue to expand their portfolios. The average number of investment properties owned by Fleet borrowers increased from 16 in Q2 2026 to 18 in Q3, with landlords holding 15 or more properties accounting for 30% of applications. This suggests that despite regulatory changes, experienced landlords remain active in the market.

Fleet Mortgages data on regional yields and landlord activity

The latest Rental Barometer covers 10 regions, showing that only the North West and Wales experienced a year-on-year decline in average rental yields. Yorkshire & Humberside recorded the highest yield at 9.3%, up from 8.7% in the previous quarter and 8.2% a year ago. The North East followed closely with a 9.2% yield, while Greater London remained the lowest-yielding region at 6.4%, despite commanding the highest average monthly rent of £2,597.

Quarter-on-quarter, yields declined in East Anglia, the North West, and Wales, while the North East held steady. The report also notes that average rental cover at origination fell from 144% to 132%, reflecting the pressures landlords face from higher mortgage rates and funding costs.

Mortgage pricing remains volatile, with average market two-year fixed rates increasing slightly from 4.78% to 4.89%, and five-year fixed rates rising from 5.44% to 5.57%. Fleet Mortgages’ own average two-year rate moved from 4.50% to 4.61%, while its five-year rate decreased marginally from 5.35% to 5.17%.

Context of the Renters Rights Act and market conditions

The Renters Rights Act, which came into force earlier in 2026, introduced a range of tenant protections including longer notice periods, restrictions on rent increases, and enhanced dispute resolution processes. These changes have altered the risk profile for landlords and influenced investment decisions.

Despite concerns that such legislation might deter investment or reduce yields, the data indicates that rental returns have remained robust or improved in most regions. This resilience is partly due to continuing housing shortages and strong rental demand, which support rental values even as landlords adjust to new regulatory requirements.

Professional landlords appear to be adapting by expanding portfolios and focusing on regions with higher yields. The shift towards limited company borrowing, which accounted for 71% of applications in Q3, also reflects a strategic approach to managing tax and regulatory impacts.

Practical implications for landlords and letting agents

For landlords, maintaining profitability in the current environment requires careful management of mortgage costs and rental income. The decline in rental cover highlights the need for thorough affordability assessments and contingency planning to manage potential income fluctuations.

Letting agents should be aware that while demand for new buy-to-let mortgages has dipped, the market remains active among established landlords. Agents may see increased instructions from professional landlords seeking to optimise yields and comply with the Renters Rights Act’s new standards.

Regions with strong yields such as Yorkshire & Humberside and the North East may offer attractive opportunities for portfolio growth. However, landlords should continue to monitor local market conditions and regulatory changes, including any further amendments to tenancy laws or safety obligations.

Uncertainties and areas to watch

While the data shows positive yield trends, the full impact of the Renters Rights Act is still unfolding. Future government policy decisions, particularly around rent regulation and landlord licensing, could further affect returns and operational requirements.

Mortgage market volatility remains a concern, with interest rates subject to change in response to economic conditions. Landlords reliant on high leverage should consider the risks of rising borrowing costs and the potential need to adjust rents within legal limits.

Additionally, the evolving tenant landscape, including behavioural changes prompted by the Act, may influence demand patterns and property management practices. Keeping abreast of official guidance and sector developments will be essential for compliance and strategic planning.

What landlords should consider now

• Review current mortgage arrangements and explore options to manage interest rate risk.
• Assess rental pricing strategies in light of local market yields and tenant protections under the Renters Rights Act.
• Ensure tenancy agreements and management practices comply fully with new legal requirements.
• Monitor regional yield trends to identify growth opportunities or areas of caution.
• Maintain detailed records of property inspections, repairs, and communications to support compliance and dispute resolution.

Supporting landlords with compliance and portfolio management

The Landlord Association (TLA) offers members access to compliance resources and practical information tailored to the evolving regulatory environment. TLA’s new property management and compliance platform, ORBIT, currently in BETA testing, aims to assist landlords and letting agents in organising property records, managing rental documentation, and recording key actions related to tenancy law and safety obligations.

Membership also provides updates on legislative changes such as the Renters Rights Act, helping landlords stay informed and prepared. ORBIT’s developing features include tools to produce and retain tenancy documents and record compliance activity, which can be valuable for landlords managing multiple properties or adapting to new requirements.

Exploring TLA membership and ORBIT BETA access can support landlords in maintaining compliance and optimising portfolio performance amid ongoing sector changes.

Looking ahead, landlords should continue to monitor mortgage market developments and regulatory updates while maintaining a focus on tenant rights and property standards to sustain rental income and portfolio growth.

Sources: Letting Agent Today