Average rental yields across England and Wales rose to 7.9% in the third quarter, new buy-to-let data shows.
The figure increased from 7.5% a year earlier, according to Fleet Mortgages’ Q3 Rental Barometer.
At the same time, the average portfolio held by Fleet’s landlord borrowers reached 18 properties. That compares with 16 in the previous quarter and 12 a year ago.
The figures suggest larger portfolio landlords continue to account for a growing share of specialist buy-to-let activity, despite higher mortgage costs.
Yorkshire tops yield table at 9.3%
Yorkshire & Humberside recorded the highest average yield at 9.3%. That was up from 8.2% in Q3 last year and 8.7% in the previous quarter.
The North East followed closely at 9.2%.
The East Midlands produced an average yield of 8.4%, while the North West stood at 8.3%. The West Midlands recorded 8.2%.
Only two of the 10 regions covered by Fleet saw annual yields fall. The North West slipped from 8.5% to 8.3%, while Wales dropped from 8.2% to 7.5%.
Greater London remained the lowest-yielding region at 6.4%, although that represented an increase from 5.9% a year earlier.
London continued to command the highest average monthly rent at £2,597. Fleet said this was almost 10% higher than in Q2.
The North East had the lowest average monthly rent at £792.
Bigger landlords take greater share
Fleet’s lending data also points to a shift towards larger portfolios.
Landlords with at least 15 buy-to-let properties accounted for 30% of applications in Q3. That compares with 26% in Q2 and 23% a year earlier.
Meanwhile, landlords owning four or more properties generated 66% of applications.
The proportion coming from landlords with between one and three properties fell from 29% to 24% quarter-on-quarter.
First-time landlords accounted for 10%, up slightly from 9%.
However, purchase activity softened during the quarter. Purchases represented 34% of Fleet’s business, compared with 36% in Q2.
Higher borrowing costs also put pressure on affordability. Average rental cover at origination dropped from 144% to 132%.
Limited company borrowing continued to dominate Fleet’s applications, accounting for 71% during Q3. This was down from 78% in the previous quarter.
Steve Cox, chief commercial officer at Fleet Mortgages, said: “It is therefore not surprising to see purchase activity ease slightly during the quarter, or rental cover come under further pressure, but we should be careful about interpreting either of those movements as landlords stepping away from buy-to-let.
“In fact, some of the other figures point very strongly in the opposite direction. The average Fleet landlord now owns 18 investment properties compared with 12 a year ago, almost a third of our applications are coming from landlords with 15 or more properties, and two-thirds are from those owning at least four.”
Cox said the figures suggest professional landlords continue to expand when suitable opportunities arise.
He added: “The rental fundamentals also remain supportive, with average England and Wales yields increasing to 7.9% and only two of the 10 regions we lend in recording a year-on-year fall.
“Yorkshire & Humberside moving to 9.3% also shows there continue to be strong regional opportunities for landlords prepared to look at the underlying rental and property fundamentals.”
