The latest Fleet Mortgages rental barometer for Q1 2024 has highlighted a clear North/South divide, with northern regions registering the highest average rental yields.
In particular, Yorkshire and Humberside boasts the highest rental yield at 8.5% — a significant increase compared to the 7.2% average yield registered in Q1 2023.
Despite a 40 bps year-on-year change, North East was the area with the second highest average rental yield, reaching 8.5% in Q1 this year.
The average rental yield for the North West has seen a 60 bps increase year-on-year to 7.9%, making it the third best region.
Meanwhile, southern regions — including the South West, South East and Greater London — took the bottom three spots in Fleet’s quarterly rental barometer, with average rental yields reaching 6.2%, 6.1% and 5.9%, respectively.
Overall, all regions in the table apart from the North East showed an annual increase in regional yields — according to Fleet, this is a result of ongoing limited supply, coupled with strong tenancy demand, fuelling rising rents, albeit at lower levels over the course of the last 12 months.
The rental barometer also includes data covering Fleet’s average rates, loan sizes, and purchase/remortgage split figures.
Over the first quarter of 2024, Fleet’s average rates across its range dropped from 5.63% to 5.24% for two-year fixes, and from 5.70% to 5.32% for five-year fixes.
Meanwhile, Fleet’s average loan size increased on the previous quarter to £183,000 in the last quarter of 2023, with the average rental cover at loan origination also up from 170% to 172%.
Steve Cox, chief commercial officer at Fleet Mortgages, commented: “In a sense, this iteration of our rental barometer returns to the status quo, with the northern regions once again making up the top three on the table, after Wales had briefly headed the list for the last quarter of 2023.
“It’s positive to see virtually all regions within which Fleet lends in England and Wales showing a positive year-on-year increase in rental yield, with Yorkshire and Humberside showing a significant 1.3% increase, which means it now tops the table with a very strong 8.5%.
“Indeed, the table itself mirrors the geography of England and Wales, with the lower rental yields for the southern regions, which you might expect given that the average greater capital values of properties ‘down South’.
“What continues to be apparent is the disconnect between supply and demand in the PRS, and with significant increases in population numbers, the continued difficulty in purchasing a home, and a lack of action on this government’s part to improve housing supply, then we’re likely to see ongoing and strong yield throughout the rest of 2024.
“There is an appetite to add to portfolios where the numbers add up, and we’ve seen our own purchase business ticking up quarter-on-quarter.
“Again, our assumption is that a falling rate environment will give landlords more confidence and money to be able to buy, and while we don’t see remortgage/purchase business parity being on the cards anytime soon, we do think we’ll see more purchasing as a percentage of our business through the rest of 2024.”
