Fleet Mortgages

Rental yields hit 5.7% in Q1 2022

Rental yields across England and Wales have reached 5.7% in Q1 2022, a 60 basis points drop compared to the same quarter last year, revealed the latest Fleet Mortgages BTL rental barometer.

However, this represents a 10 basis points increase to rental yields registered in Q4 2021.

All regions have seen a slight yearly drop in rental yields when compared to Q1 2021, except for the North East of England, which has remained unchanged.

The North East has also registered the highest regional figure for the seventh consecutive quarter running (8.7% in Q1 2022).

Yorkshire & Humber was the area with the second highest rental yield, reaching 7.5%.

Although the North West saw the biggest drop in rental yields compared to Q1 2021, it had the third highest figure of the quarter (6.7%).

Fleet Mortgages continues to anticipate strong tenant demand right across England and Wales through the rest of 2022 — however, this might change towards the end of the year and into 2023, citing increases in mortgage rates, a tightening of government policies, and other pressures on household incomes as having a specific impact. 

The lender also expects BTL mortgage rates to continue rising into the latter stages of 2022, as it believes it is unlikely lenders would continue to absorb both bank and swap rate increases.

Steve Cox, CCO at Fleet Mortgages (pictured above), said: “In our previous forecast, we anticipated demand for rental properties would continue to be strong into 2022, while also seeing a relative increase in mortgage interest rates, and that has certainly proven to be the direction of travel for the market.

“This demand-side strength, coupled with relatively tight supply, means rental yields continue to be strong, and that overall across England and Wales, we have seen an increase in levels compared to the last quarter of 2021.

“On a yearly basis, it’s clear that rental yields have dipped very slightly, but that comparison doesn’t tell the whole story by any means — the shorter-term analysis has to focus on the still very strong figures fuelled by tenant demand, with the future forecast likely to be more of the same, at least until towards the end of the year.

“Looking further ahead, it’s likely that landlords are going to need to cut their cloth accordingly when it comes to setting rents, especially given the large increases in the cost of living that tenants are clearly not immune from, which will need to be factored into rent levels.

“Overall, it’s obvious that property investment retains its allure as a strong asset class, and the good news for landlords is that the supply of finance from lenders like Fleet Mortgages remains very strong, with rates still at highly competitive levels. 

“As we move through the year, it is likely that rates will inch up though, however there are a wide range of opportunities for all types of landlords, wanting to purchase or refinance all types of rental properties, and that this should help bring much-needed supply into the PRS.”

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