Rental yields for buy-to-let properties have shown encouraging growth, according to the latest Buy-to-Let Rental Barometer from Fleet Mortgages, which analysed data for the fourth quarter of 2024 across England and Wales.
The report reveals that the average rental yield in England and Wales rose to 7.4% in Q4 2024, marking an annual increase of 0.6 percentage points compared to the same period in 2023. On a quarterly basis, yields rose by 0.2%.
While most regions saw gains, the West Midlands experienced a rare annual decline in yields, alongside quarterly decreases in Greater London and the North East. Nevertheless, the North East maintained its position as the top-performing region, with an average yield of 9.3%. Yorkshire and Humberside climbed to second place with an 8.6% yield, surpassing the North West at 8.3%.
Wales also rebounded after a weaker performance earlier in the year, achieving an 8.2% yield following a 0.5% point annual increase.
UPWARD TRAJECTORY
Meanwhile, the East Midlands continued its upward trajectory with a 1.2% annual rise, although quarterly growth slowed to 0.2%.
While yields across England and Wales remained broadly static year-on-year, the combination of positive rental growth and falling mortgage costs over the past 12 to 18 months has made property investment increasingly attractive for landlords.
Applications from landlords with medium-sized portfolios (6–14 properties) rose to 34% in Q4 from 30% in Q3. First-time landlord applications also saw a modest increase, rising from 10% to 11% over the same period.
REGIONAL TRENDS
Greater London reported the highest average monthly rent at £2,056 per property, followed by the South West at £1,734. In contrast, the North East continued to offer the most affordable rental stock, with an average monthly rent of £706.
Fleet’s data also revealed an increase in the average loan size, which rose from £196,000 in Q3 to £202,000 in Q4, reflecting improved rental affordability. The average rental cover at loan origination grew from 176% to 182%, highlighting stronger rent-to-mortgage ratios.
FALLING RATES SPUR INVESTMENT
Mortgage rates for buy-to-let properties showed a downward trend, with Fleet’s average 2-year fixed rate at 75% loan-to-value (LTV) decreasing from 5.02% to 4.71%. Its 5-year fixed rate also fell from 5.24% to 5.11%. Fleet anticipates continued rate reductions throughout 2025.
Across the peer group, 2-year fixed rates averaged 5.33%, down slightly from 5.34%, while 5-year fixed rates saw a marginal increase from 5.35% to 5.45%.Applications for property purchases rose to 44% in Q4, up from 43% in the previous quarter, with limited company borrowers accounting for 79% of all applications – an increase from 77%. Conversely, applications from private individual investors declined from 23% to 21%.
GREATER POSITIVITY
Steve Cox, Chief Commercial Officer at Fleet Mortgages, says: “There is certainly a greater degree of positivity around the buy-to-let market now than at this time last year, even with the Budget decision to increase stamp duty surcharges for landlord purchasers.
“Our Rental Barometer reflects that optimism over the last quarter of 2024, with average rental yields – on the whole – continuing to improve, albeit at a slightly slower rate, but also in terms of Fleet’s figures for average monthly rents, average rates, average loan sizes, rental cover, and application numbers for property purchases.”
FUTURE CERTAINTY
And he adds: “Certainly, many landlords were waiting for the Budget before making decisions, but even with the stamp duty increase, at least they now have certainty about the future, can plan accordingly, and as mentioned, the financial position is positive which will allow more landlords to act and to add to portfolios where appropriate.
“In our view, all of this points to a more positive market for buy-to-let in 2025, especially if we see rates fall steadily, as anticipated, while at the same time, tenant demand remains strong, while the supply of properties in the private rental sector is still not enough to meet this demand.”
ENCOURAGING
“Our views are clearly shared by others in the marketplace, most notably IMLA. Its recent review of 2024 and preview of 2025 paints an encouraging picture for buy-to-let with an estimate of £33.2 billion of gross lending in 2024, which would be 10% up on 2023.
“Its outlook for the future is also positive, predicting £38bn of buy-to-let gross lending this year and up again to £42bn in 2026, arguing this improvement will come from greater landlord activity fuelled by lower rates, improved affordability, and a continuation in strong rental yields.
“Overall as we begin 2025, our expectation is for a strong year of lending activity and business, with a higher degree of demand, both from established landlords and – encouragingly – from first-time borrowers.
“We are here to work with advisers and their landlord clients to ensure they get the most competitive products and criteria to allow them to take advantage of increasingly positive market conditions.”
