Wales tops BTL lender’s rental yield chart

The latest rental barometer from Fleet Mortgages reveals that Wales has overtaken the North East as the region with the highest rental yield in England and Wales.

The report, which covers the fourth quarter of 2023, compares the rental yield changes in each region where Fleet operates.

According to the specialist buy to let lender’s data, Wales achieved an impressive 8.9% rental yield in Q4, up from 7.2% in Q3, and 6.7% in Q4 2022.

This is the first time that Wales has claimed the top spot after the North East had been leading for 13 quarters in a row.

‘Landlords’ ability to add to portfolios’

Fleet’s chief commercial officer, Steve Cox, said: “2023 was a challenging year, not least in terms of landlords’ ability to add to portfolios given the big increase in mortgage product pricing.

“That has clearly eased in recent weeks, and we ourselves have seen purchase lending improve, but we are not anticipating a huge improvement in purchase numbers, albeit lower rates and the ability to meet affordability criteria, will allow some landlords to buy.

“Whether this changes significantly might have a lot to do with whether the Government acts on stamp duty in the March Budget, and whether rates continue to fall as they have done over the last month.”

He added: “Historically, we’ve tended to see more landlords active in the sector when rates are around the 5% mark, and we’re getting there, so we would not rule out more purchasing, providing landlords can find the property they require – no easy feat in the current market.”

North East saw its rental yield drop

The North East, however, saw its rental yield drop from 9.1% in Q3 to 8.8% in Q4 2023, losing its edge over Wales.

Other regions that performed well in Q4 were the North West and Yorkshire and Humberside, both of which increased their rental yield by 1.1% year-on-year, reaching 7.5% and 7.4% respectively.

The average rental yield for England and Wales rose by 0.3% year-on-year, from 6.6% in Q4 2022 to 6.9% in Q4 2023.

This was also a 0.1% increase from Q3 2023, when the average was 6.8%.

Rise in rental yield across most regions

Fleet says the rise in rental yield across most regions is down to the strong demand for rental properties, which outpaced the supply and pushed up the rental prices.

The lender also says that the average loan size of its mortgages also fell from £187,000 in Q3, to £175,000 in Q4, along with the average rental cover at loan origination, which went down from 177% to 170%.

On a positive note, Fleet highlights that the lending figures point to more landlords looking to expand their portfolios in a favourable interest rate environment.

Also, the portfolio of investment properties owned by landlord borrowers remained stable at 12.

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