Flats and terraced houses scored the highest yielding growth of last year, according to Paragon Bank’s Q4 BTL Report.
Yields on flats finished the year at 6.33%, 24bps higher than at the end of 2024, with terraced houses’ rent increasing 23bps to 6.28%.
Houses in HMO achieved the highest yields at the end of 2025 at 8.61%, up 20bps.
Overall, average yields across the UK finished the year at 6.93%, broadly in line with the same period in 2024 (6.94%) and Q3 2025 (6.95%).
Paragon also analysed average rental yields in the quarter on a regional basis.
Wales and the North East had the highest yields in the quarter at 8.83% and 8.20%, respectively, having increased 74bps and 38bps over the year.
West Midlands was the region with the biggest contraction, with rental yields decreasing by 29bps to finish the year at 7.08%.
Greater London had the lowest average rental yield in the quarter at 5.78%, though this had increased by 30bps over the year.
“Yields have performed strongly since summer 2022, when house price growth began to slow and rental inflation accelerated due to the imbalance between supply and demand,” said Louisa Sedgwick, managing director of mortgages at Paragon Bank (pictured above).
“While we saw this momentum ease last year as the market normalised, we expect yields to remain stable throughout this year.
“Although overall yield growth was relatively flat in 2025, certain property types and regions stood out, reflecting varied local market conditions and shifting demand for specific kinds of homes.”
