Buy to let yields soar to 14-year high - Paragon

Buy to let properties are delivering their highest average rental yields since February 2011, according to fresh data from Paragon Bank.

The figures, drawn from the bank's lending records, show that landlords achieved an average yield of 7.11% in April, edging close to the 7.12% recorded 14 years ago.

This marks a significant jump from the 6.94% seen at the close of 2024, which was a 13-year high.

The surge comes amid a backdrop of steady rent increases fuelled by robust tenant demand and a persistent shortage of rental homes.

Yields continue to increase

The bank's commercial director of mortgages, Russell Anderson, said: "Our latest lending data highlights how average rental yields have continued to increase from the 13-year high we revealed at the end of last year.

"While the most recent economic instability caused by the threat of Trump's tariffs is understandably impacting business confidence across many sectors, these figures offer tangible evidence that buy to let continues to offer strong returns for investors."

He added: "This is particularly true where landlords employ a strategy of targeting properties that offer higher returns, HMOs being the most obvious example, or investing in areas where property is relatively more affordable but benefits from the strong tenant demand we see all over the UK."

Best yields in Wales

Paragon's data on buy to let purchases and remortgages indicates a 40-basis point rise in yields compared to last year, driven by moderating house price growth.

Since hitting a low of 4.91% in May 2017, yields have followed a consistent upward trajectory.

Regionally, Wales leads the pack with an impressive average yield of 8.43% in April, up from 8.09% in December 2024.

Yorkshire and Humberside and the North follow closely, offering 7.97% and 7.94%, respectively.

Greater London, despite a 30-basis point uptick to 5.78%, remains the region with the lowest returns.

Among property types, Houses in Multiple Occupation (HMOs) stand out, delivering yields of 8.50%, a slight increase from 8.41% late last year.

Landlords are heading north

News of yields hitting a 14-year high comes as Hamptons reveals that the best returns are to be found in the north of England.

It says that in the first four months of 2025, a record 39% of BTL purchases occurred in the north of England or the Midlands, a sharp rise from 24% in 2007 and 34% in 2022, when interest rates began to climb.

In contrast, the south of England is losing appeal due to its pricier properties and lower rental returns.

Despite a nationwide uptick in yields, Hamptons says that investors are prioritising regions with stronger profitability to offset rising mortgage rates, maintenance costs and tax burdens.

This year, 23% of BTL purchases delivered double-digit yields, compared to 17% in 2024 and just 9% in 2016, with the north's higher-yielding markets playing a significant role.

Aneisha Beveridge, the head of research at Hamptons, said: "One of the main ways landlords are trying to mitigate against higher stamp duty and mortgage costs is by seeking better-yielding and cheaper properties, increasingly in northern England."

Strong student tenant demand

Simon Thompson, the managing director of Accommodation for Students, said: "It's interesting that yields have hit a 14-year high because there are still investment opportunities around.

"It does look like yields will continue rising, which is food for thought for student landlords with so many issues affecting the sector.

"And, as Paragon says, there are still strong returns available, though Hamptons says the best results are in the North."

He added: "With strong student tenant demand and a growing shortage of properties to rent, landlords will undoubtedly continue seeing rent rises that help deliver yields."