WALES LEAPS TO THE TOP OF AVERAGE RENTAL YIELD TABLE IN LATEST FLEET MORTGAGES’ RENTAL BAROMETER
17 January 2024
Fleet Mortgages, the buy-to-let specialist lender, has today (17th January 2024) released the latest iteration of its Buy-to-Let Rental Barometer covering Q4 2023 rental yields across England and Wales.
The regional snapshot covers all areas of England and Wales in which Fleet lends and highlights the rental yield changes that have occurred in each of those regions. In this iteration, the yearly comparison is between Q4 2023 and Q4 2022.
Average Rental Yields y/y change
Region 2022 Q4 2023 Q4
Wales 6.7% 8.9% 2.2%
North West 7.5% 8.6% 1.1%
Yorkshire and Humberside 7.3% 8.4% 1.1%
North East 8.0% 7.8% -0.2%
West Midlands 6.7% 7.4% 0.7%
East Anglia 5.7% 6.3% 0.6%
East Midlands 6.4% 6.3% -0.1%
South West 6.3% 6.0% -0.3%
South East 5.7% 6.0% 0.3%
Greater London 5.3% 5.5% 0.2%
England & Wales (Total) 6.6% 6.9% 0.3%
The total average yield for England and Wales shows an annual increase again up by a smaller 0.3% % to 6.9% on the same quarter in 2022. This is also up 0.1% on the Q3 2023 figure of 6.8%.
Over the past two quarters, every region of England and Wales had exhibited annual yield increases, however in this Barometer we have three regions – the North East, East Midlands and the South West – which have dipped slightly, although only by a small percentage.
The dip in rental yield in the North East, and corresponding increases in rents in Wales, the North West, and Yorkshire & Humberside – does mean that it loses its top spot after thirteen consecutive quarters leading the way.
A large 2.2% increase in rental yields over the year takes Wales to the top spot with 8.9% yield, which was also 1.7% up on Q3 2023. Both the North West and Yorkshire and Humberside saw rental yields increase by 1.1% annually.
Fleet said that in all regions of the UK, rental yield was being driven by demand continuing to outstrip supply, inevitably leading to higher rental prices in most areas.
The Rental Barometer also includes data covering average rates, loan sizes, and landlord portfolio numbers.
Over the last quarter of 2023, the market saw soft rates drop significantly, and this fed into buy-to-let product rates also coming down. Fleet’s product pricing continued to fall in Q4 last year, with the average rate across its range having been 5.74% in Q3, and now down to 5.49% in Q4.
Fleet said it anticipates this will fall further in Q1 2024 given it has already cut its fixed-rate products twice in January.
Fleet’s average loan size fell on the previous quarter, down from £187k to £175k, with the average rental cover at loan origination also dipping from 177% to 170%.
Positively, mortgages for purchase business increased from 30% of Fleet’s total lending to 32%, potentially reflecting a more benign interest rate environment allowing landlord borrowers to look at adding to portfolios. The number of investment properties owned by landlord borrowers stayed stable at 12.
Steve Cox, Chief Commercial Officer at Fleet Mortgages, commented:
“While Q4 differs to the two previous quarters in terms of having three regions showing falls in average annual rental yields, those falls are small, and we have total yield across all those England and Wales regions in which Fleet lends continuing to move upwards, now totalling 6.9%.
“That remains a strong rental yield figure, however in other regions – notably Wales, the North West and Yorkshire and Humberside – rental yields have jumped significantly again, reflecting no doubt a continued lack of supply compared to overall tenant demand.
“Through 2024 we might anticipate rents come off these highs a little, but it’s still likely to be the case that the number of prospective tenants wanting property far outweighs its availability.
“2023 was a challenging year, not least in terms of landlords’ ability to add to portfolios given the big increase in mortgage product pricing. That has clearly eased in recent weeks, and we ourselves have seen purchase lending improve, but we are not anticipating a huge improvement in purchase numbers, albeit lower rates and the ability to meet affordability criteria, will allow some landlords to buy.
“Whether this changes significantly might have a lot to do with whether the Government acts on stamp duty in the March Budget, and whether rates continue to fall as they have done over the last month.
“Historically, we’ve tended to see more landlords active in the sector when rates are around the 5% mark, and we’re getting there, so we would not rule out more purchasing, providing landlords can find the property they require – no easy feat in the current market.
“Overall, it has been a much more positive start to the year than we saw in the Spring and Summer of 2023, and while we are not anticipating a huge boost to buy-to-let transactions and lending activity, there is a far greater potential for it than we witnessed for most of last year.”
Fleet Mortgages’ product guide and full list of lending criteria is available to view by visiting its website at: www.fleetmortgages.co.uk
