Fleet Mortgages has released the latest iteration of its Buy-to-Let Rental Barometer covering Q4 2024 rental yields across England and Wales.
The total average yield for England and Wales was 7.4%, showing an annual increase of 0.6% on the same quarter in 2023, and 0.2% up on the previous quarter.
Rental yields remained almost universally positive, with only one region in England and Wales, the West Midlands, showing a year-on-year fall.
However, compared to the previous quarter, three regions – Greater London, the North East and the West Midlands – have all seen reducing yields.
The North East continued to lead the average rental yield table at 9.3%, with Yorkshire & Humberside moving up to second place with 8.6%, above the North West (8.3%), which occupied second place in the last Barometer.
Having dropped down the list in Q3 2024, Wales moved back up with a 0.5% year-on-year increase delivering a quarterly rental yield of 8.2% while the East Midlands continued to show strong growth, showing a year-on-year increase of 1.2%, but this has slowed recently, up only 0.2% on the last quarter.
Averaged out across England & Wales, rental yields were broadly static compared to a year ago.
However, with almost all regions still in positive territory, and with mortgage costs having fallen over the last 12 to 18 months, the yields available made property investment an attractive option for many established and new landlords.
Applications received by Fleet from landlords with six to 14 buy-to-let (BTL) properties increased from 30% in Q3 to 34% in Q4,
There was a continuation in the growth of applications from first-time landlords, up from 10% to 11%, over the same period.
The highest average monthly rent per property was generated within Greater London at £2,056, followed by the South West at £1,734.
The North East typically contained the most affordable rental stock, with an average monthly rent of £706.
The Rental Barometer also included data covering average rates, loan sizes, and purchase or remortgage split figures.
Comparing the third and fourth quarters of 2024, Fleet’s product pricing continued to fall.
Its average 75% loan-to-value (LTV) 2-year fixed-rate fell from 5.02% to 4.71%, while its 5-year fixed-rate fell from 5.24% to 5.11%.
The lender said it anticipated a continuation in this trend through 2025.
Peer group average rates were 5.33% for 2-year fixed-rates, down from 5.34%, but saw an increase from 5.35% to 5.45% for 5-year.
Applications for property purchases in Q4 2024 also increased, up from 43% last quarter to 44%, while 79% of all applications through the quarter were from limited company borrowers – up from 77% – while private investor borrower applications were down from 23% to 21%.
Steve Cox, chief commercial officer at Fleet Mortgages, said: “There is certainly a greater degree of positivity around the buy-to-let market now than at this time last year, even with the Budget decision to increase Stamp Duty surcharges for landlord purchasers.
“Our Rental Barometer reflects that optimism over the last quarter of 2024, with average rental yields – on the whole – continuing to improve, albeit at a slightly slower rate, but also in terms of Fleet’s figures for average monthly rents, average rates, average loan sizes, rental cover, and application numbers for property purchases.”
He added: “Certainly, many landlords were waiting for the Budget before making decisions, but even with the Stamp Duty increase, at least they now have certainty about the future, can plan accordingly, and as mentioned, the financial position is positive which will allow more landlords to act and to add to portfolios where appropriate.
“In our view, all of this points to a more positive market for buy-to-let in 2025, especially if we see rates fall steadily, as anticipated, while at the same time, tenant demand remains strong, while the supply of properties in the private rental sector is still not enough to meet this demand.
“Our views are clearly shared by others in the marketplace, most notably IMLA.
“Its recent review of 2024 and preview of 2025 paints an encouraging picture for buy-to-let with an estimate of £33.2bn of gross lending in 2024, which would be 10% up on 2023.
“Its outlook for the future is also positive, predicting £38bn of buy-to-let gross lending this year and up again to £42bn in 2026, arguing this improvement will come from greater landlord activity fuelled by lower rates, improved affordability, and a continuation in strong rental yields.”
Cox concluded: “Overall as we begin 2025, our expectation is for a strong year of lending activity and business, with a higher degree of demand, both from established landlords and – encouragingly – from first-time borrowers.
“We are here to work with advisers and their landlord clients to ensure they get the most competitive products and criteria to allow them to take advantage of increasingly positive market conditions.”
