Flats and terraced homes delivered the strongest rental yield growth for landlords in 2025 according to Paragon Bank’s Q4 Buy-to-Let Yield Report.
The report, based on Paragon’s lending data, found that yields on flats ended the year at 6.33%, up 0.24 percentage points (pp) on 2024, while terraced homes rose 0.23pp to 6.28%.
Houses in Multiple Occupation (HMOs) achieved the highest yields overall at 8.61%, up 0.20pp on the year. Multi-unit blocks followed with a yield of 7.32% in Q4.
Regionally, Wales saw the strongest growth, with yields rising 0.74pp to 8.83%, followed by the North East, up 0.38pp to 8.20%. Greater London recorded a 0.30pp increase to 5.78%, while other regions saw more modest changes, leaving the UK-wide average yield broadly flat at 6.93%, almost unchanged from 6.94% a year earlier.
YIELDS TO REMAIN STABLE
The report highlights the continued importance of regional and property-type dynamics for short-term finance and buy-to-let investors.
While HMOs remain the highest-yielding property type, growth in flats and terraces suggests that smaller, more affordable homes remain attractive to landlords seeking steady returns.
Wales, the North East, and parts of Greater London offer strong opportunities.
Wales, the North East, and parts of Greater London also appear to offer particularly strong opportunities for yield-focused investors.
SHIFTING DEMAND
Louisa Sedgwick (main picture), Managing Director of Mortgages at Paragon Bank, says: “Yields have performed strongly since summer 2022, when house price growth began to slow and rental inflation accelerated due to the imbalance between supply and demand.
“While we saw this momentum ease last year as the market normalised, we expect yields to remain stable throughout this year.
“Although overall yield growth was relatively flat in 2025, certain property types and regions stood out, reflecting varied local market conditions and shifting demand for specific kinds of homes.”
