Fleet Mortgages' latest data reveals that the total average rental yield across England and Wales increased from 6.6% to 7.6% in the year leading up to Q2 2024.

Fleet's 'Buy-to-Let Rental Barometer' further indicated that this figure had risen from 7.1% in Q1 2024, showcasing a consistent upward trend.

A comprehensive regional analysis covered all regions in England and Wales where Fleet operates, spotlighting the significant shifts in rental yields within each area.

Fleet highlighted a robust increase in yields across every corner of England and Wales, with each region displaying year-on-year growth, and the North East even reaching a remarkable double-digit yield in the second quarter.

This edition of the Rental Barometer also unveiled regional dynamics, with Yorkshire and the Humber slipping from its top position to fifth place, recording an average yield of 7.6%, down from 8.5% the previous quarter.

The North East ascended to the top, outpacing the North West, while Wales and the West Midlands also climbed ahead of Yorkshire and Humberside.

A distinct North-South divide persisted, with Northern regions leading the charge in rental yields.

Greater London boasted the highest average monthly rent per property at £2,024, followed by East Anglia at £1,594. Conversely, the North East offered the most affordable rents, averaging £768 per month.

Fleet attributed the annual and quarterly rise in average rental yields to the ongoing disparity between tenant demand and property supply, suggesting this trend would persist until the private rental sector could expand sufficiently to address demographic challenges, including population growth and the increasing hurdles faced by potential homeowners.

The Rental Barometer also featured data on average rates, loan sizes, and the breakdown of purchase versus remortgage figures.

Steve Cox, Fleet Mortgages' chief commercial officer, remarked, “While there are few surprises within this iteration of the Rental Barometer, it’s clear the trends we have all been seeing in the wider buy-to-let and private rental sector continue to strengthen right across the board, fuelled by a continued supply/demand imbalance.

“Hence we have every single region within which Fleet lends in England and Wales showing a year-on-year increase in average rental yields, pushing the total figure to 7.6% – a 1% increase on a year ago.

“The requirements for an ongoing strong yield are clearly not going away, particularly in a higher interest-rate environment in which many refinancing landlord borrowers are having to pay far more for their monthly mortgages than they did two to five-years ago.”

He added, “When it comes to mortgage pricing, it showed a clear increase in quarter two, however with inflation now down to target, once we have the General Election out of the way, we would anticipate a Base Rate cut in either August or September, and swap rates will move to reflect further cuts in the not so near future.

“There is further good news in this Barometer with an increase in purchase applications – a signal that landlords are seeking to add to portfolios, and with the average rental cover at origination also rising, it shows that borrowers continue to secure the rents they need to cover both their mortgage and other costs.

“Again, it won’t be surprising to see limited company borrowers continuing to dominate, given the tax relief that can still be secured within a corporate structure.

“That is a trend that will continue for many years to come.”

Cox concluded, “Overall, these latest figures are positive, and they signal further activity in the second half of the year, particularly if – as we are already seeing – pricing continues to move down.

“We at Fleet have already been able to make some price reductions and our expectation is that we will continue to move further in this direction later in 2024.”