Fleet Mortgages

Rental yields drop to 5.6% in Q4 2021

Rental yields across England and Wales fell by 60 basis points to 5.6% in Q4 2021, revealed the latest Fleet Mortgages BTL Rental Barometer.

According to the data, only East Anglia, West Midlands and the South East saw a yearly rise in average rental yields, the former of which saw the biggest increase over the year, reaching 6.8% in Q4 2021.

Most of the regions have seen relatively small drops in rental yields in 2021, with the exception of the North West and East Midlands, where yields have gone down by over 100 basis points.

For the sixth consecutive quarter running, the North East of England has the top rental yield regional figure, dipping slightly to 7.9%, but still holding onto the number one spot. 
Wales was the region with the second highest rental yield (7.1%), followed by Yorkshire & Humberside (7%).

Fleet anticipates tenant demand to remain strong throughout 2022, but believes that the overall supply within the private rented sector is unlikely to meet the demand, despite landlords focusing on adding to their portfolios. 

The specialist lender also predicted that prospective owner-occupiers would also continue to face supply-side issues and therefore, the PRS would continue to be required to fill the housing gap, resulting in rental yields maintaining good levels.

Steve Cox, CCO at Fleet Mortgages (pictured above), said: “Our new Rental Barometer, covering the last three months of 2021, shows that rental yields are keeping pace with property prices; this is good news for the private rental sector and landlord borrowers.  

“In terms of how this might impact landlord activity, it looks increasingly positive for 2022, particularly as professional investors review the recent capital increases in their properties and make the most of them via refinancing in order to secure the deposits required for new purchases.

“2022 has been described as a big year for remortgaging in the BTL space, and that looks highly likely, but it will be remortgaging with a reason for existing landlords, who tend to capital raise in order to secure the funds they need for portfolio growth.

“With these yield figures showing a strong yearly return possible across most regions of the UK, and with house prices likely to continue on an upward trajectory due to a continued lack of supply, property investment and BTL is likely to retain its allure. 

“This is good news for advisers active in this space and their clients, who are going to benefit from a highly competitive finance market and access to lenders who have a strong appetite to lend right across the piece.”

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