Rental yields rose across every region in England and Wales in Q1 2026 with average returns pushing above 8% as strong tenant demand continued to support landlord income.
The latest Rental Barometer from Fleet Mortgages shows average yields increased by 0.7% year-on-year and 0.4% on a quarterly basis to reach 8.1%, highlighting continued resilience in the private rented sector despite a shifting mortgage backdrop.
Regional performance remained strongest in the North and Midlands, with the North East delivering the highest average yield at 9.8%. Yorkshire and Humberside, the West Midlands, North West, Wales and the East Midlands all recorded yields above 8%, reinforcing the ongoing north-south divide in landlord returns.
However, southern regions also saw upward movement, with the South West recording the largest annual increase, up 1.1% to 7.8%, suggesting improving conditions beyond traditionally higher-yielding areas.
MARKET SHIFT
While the headline figures point to a strong quarter, the data masks a shift in market conditions towards the end of Q1. January and February were characterised by easing mortgage rates and improved affordability, but March saw a sharp reversal driven by global events, pushing up swap rates and triggering widespread product repricing and withdrawals.
This shift has already begun to weigh on landlord activity. Purchase applications fell to 33% of Fleet’s total business in Q1, indicating growing caution among investors even before the full impact of March volatility filters through.
Despite this, tenant demand remains robust, with average rents rising across every region. The North East and Yorkshire and Humberside recorded some of the strongest annual rental growth, up 33.6% and 31.0% respectively, helping to underpin yields and offset higher borrowing costs.
The data also points to an increasingly professionalised landlord base. Over 63% of applications came from landlords with four or more properties, while those with portfolios of 15 or more accounted for 30% of business. Limited company borrowing now represents 78% of applications, reflecting the continued shift towards structured investment.
CAUTIOUS APPROACH
Steve Cox, Chief Commercial Officer at Fleet Mortgages, says: “The Q1 data paints a positive picture for landlords, with rental yields increasing across every region and average returns now sitting above 8% nationally.
“That reflects the strength of tenant demand and how improved rental income continues to play in supporting landlord returns.
“However, it is important to recognise that much of this data reflects the first two months of the quarter, when conditions were more stable and mortgage pricing was easing. The market we are operating in now looks quite different following a continuation of the volatility we saw from March.
“The increase in swap rates and the resulting changes to product availability and pricing are likely to have an impact on landlord activity, particularly when it comes to new purchases. We have already seen some signs of a more cautious approach, and that may continue in the short term.”
“Demand from tenants is not going away.”
But he adds: “That said, the fundamentals of the UK private rental sector remain strong. Demand from tenants is not going away, yields are holding up well, and landlords should continue to take a long-term view of their investments.
“As we move through Q2, it will be important to see how these recent market changes feed through into activity and sentiment, but the sector remains well supported even as it adjusts to a more uncertain environment.”
