Landlords' average gross buy-to-let yields have reached their highest level since 2011, with Paragon Bank's mortgage offer data showing an average of 7.22% in the third quarter of this year. This figure marks an increase from 7% in the preceding quarter and 6.94% a year earlier.
Paragon Bank attributes these increases, observed since 2022, to subdued house price growth combined with continued demand for privately rented homes. Louisa Sedgwick, Paragon’s managing director of mortgages, noted that the increase reflects the balance between property values and rental income.
Regionally, the East Midlands recorded the highest average yield for landlords purchasing or remortgaging, at 8.10%. This was 0.55 percentage points higher than both the previous quarter and the same period last year. The North East followed with 8.02%, then Scotland at 7.95% and the North West at 7.88%. Greater London had the lowest average yield at 5.79%, despite a 0.23 percentage point rise over the quarter.
By property type, houses in multiple occupation (HMOs) generated the highest average yield at 8.80%, though this was slightly down on the previous quarter but up on a year earlier. Multi-unit blocks followed at 7.36%, with flats at 6.66% and terraced homes at 6.46%. Detached homes produced the lowest average yield at 4.77%.