Fleet Mortgages has revealed an average year-on-year increase of 0.7% in rental yields across England and Wales, according to the latest data from its BTL rental barometer covering Q2 2023.
Across all regions the barometer shows an annual increase in rental yields with the total up from 5.6% the previous year, to 6.3% in Q2 2023.
The North-East of England continues to retain its top regional rental yield figure for the twelfth consecutive quarter, posting the same 8.6% yield as the previous quarter, however both Wales and the North-West jumped above Yorkshire and Humberside in the table, up 1.2% and 0.4% respectively on the previous year.
East Anglia and Greater London also increased on the same quarter last year.
The last iteration of the rental barometer introduced a raft of new data covering average rates, loan sizes, landlord portfolio numbers, and average monthly rental income by region.
The lender said the bigger than anticipated fall in inflation announced this month, was already having an impact on swap rates, and as a result there was a potential for rates to fall over the next three-month period.
Fleet’s average loan size is now £174,000, down from £197,000 in the previous quarter, with the average rental cover at loan origination also slightly down from 181% to 167%.
Mortgages for purchase business had dropped from 37% of Fleet’s total lending to 32%, while the number of investment properties owned by landlord borrowers increased from 11 to 12, continuing to show a customer base of predominantly larger portfolio players.
According to the barometer, gross rental income now exceeds £1,000 in six out of 10 regions, whereas a year ago, this was true for only five regions.
Steve Cox, CCO at Fleet Mortgages (pictured above), commented: “Q2 of 2023 was undoubtedly an eventful three-month period and followed a relatively benign first quarter of the year, with significant increases in product rates which had a clear impact across the wider mortgage market but also specifically within BTL.
“However, the fundamentals of the PRS across England and Wales continue to be similar, namely a lack of property supply, strong ongoing tenant demand, and house prices continuing to ease.
“There are positives to grasp though, not least the fact we continue to cater for a predominantly professional landlord-focused borrower demographic, the obvious stronger rents and yields that are achievable, and the recent falls in inflation are starting to be felt in the capital markets, with swaps coming off their most recent highs.
“I’m hopeful that if this continues to be the direction of travel, we’ll see product rates reacting to swaps, and we’ll be able offer some keener pricing across our range and to explore bringing back certain product types that we would ordinarily be offering.
“For those that can stay invested and who can make the maths work on their properties, BTL remains a strong investment, and we’ll continue to support advisers and their clients to ensure they can get the finance they require for the long-term health of their portfolios.”
