NORTH/SOUTH DIVIDE CLEAR IN TERMS OF AVERAGE RENTAL YIELD IN LATEST FLEET MORTGAGES’ RENTAL BAROMETER
10 April 2024
Fleet Mortgages, the buy-to-let specialist lender, has today (10th April 2024) released the latest iteration of its Buy-to-Let Rental Barometer covering Q1 2024 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 Q1 2024 and Q1 2023.
Average Rental Yields y/y change
Region 2023 Q1 2024 Q1
Yorkshire and Humberside 7.2% 8.5% 1.3%
North East 8.8% 8.4% -0.4%
North West 7.3% 7.9% 0.6%
West Midlands 7.0% 7.6% 0.6%
Wales 7.0% 7.4% 0.4%
East Midlands 6.3% 6.6% 0.3%
East Anglia 5.8% 6.4% 0.6%
South West 6.0% 6.2% 0.2%
South East 5.7% 6.1% 0.4%
Greater London 5.3% 5.9% 0.6%
England & Wales (Total) 6.7% 7.1% 0.4%
The total average yield for England and Wales shows an annual increase again, up by 0.4% % to 7.1% on the same quarter in 2023. This is also up 0.2% on the Q4 2023 figure of 6.9%.
Every region of England and Wales bar one – the North East - has seen annual yield increases, however its year-on-year drop of 0.4% does not stop it from featuring in second place with an average rental yield of 8.4%.
In this iteration of the Rental Barometer, the average rental yield table continues to show a clear North/South divide, with the top regions all being in the North – Yorkshire & Humberside, North East and North West – with the Midlands and Wales in the middle, followed by the Southern regions.
Yorkshire & Humberside jumps to the top spot, above the North East, which has tended to be the number one region for most of the Rental Barometer iterations.
Last quarter, Wales had the highest average rental yield, but it has fallen back to fifth in the table, with a notable increase of 0.6% for the West Midlands, as well as East Anglia and Greater London.
Indeed, all regions in the table – apart from the North East - showed an annual increase in regional yields with Fleet suggesting this is the result of ongoing limited supply, coupled with strong tenancy demand, fuelling rising rents, albeit at lower levels over the course of the last 12 months.
The Rental Barometer also includes data covering average rates, loan sizes, and purchase/remortgage split figures.
Over the first quarter of 2024 Fleet’s product pricing continued to fall as anticipated, with the average rate across its range at 5.24% for two-year fixes and 5.32% for five-year fixes, down from 5.63% and 5.70% respectively in the previous quarter.
Fleet said it awaits movement in both Bank Base Rate and swap rates to determine where product pricing might move next, but anticipates further rate falls from the middle of 2024, if not before.
Fleet’s average loan size increased on the previous quarter, up to £183k, from £175k in the last quarter of 2023, with the average rental cover at loan origination also up from 170% to 172%.
Adding to the positive movement in many areas, mortgages for purchase business increased again from 32% of Fleet’s total lending to 33%, with borrower type split between 33% private investors and 67% limited companies.
Steve Cox, Chief Commercial Officer at Fleet Mortgages, commented:
“In a sense, this iteration of our Rental Barometer returns to the status quo, with the northern regions once again making up the top three on the table, after Wales had briefly headed the list for the last quarter of 2023.
“It’s positive to see virtually all regions within which Fleet lends in England and Wales showing a positive year-on-year increase in rental yield, with Yorkshire & Humberside showing a significant 1.3% increase, which means it now tops the table with a very strong 8.5%.
“Indeed, the table itself mirrors the geography of England and Wales, with the lower rental yields for the Southern regions, which you might expect given, on average, the greater capital values of properties ‘down South’.
“What continues to be apparent is the disconnect between supply and demand in the private rental sector, and with significant increases in population numbers, the continued difficulty in purchasing a home, and a lack of action on this Government’s part to improve housing supply, then we’re likely to see ongoing and strong yield throughout the rest of 2024.
“Clearly, landlord borrowers had a difficult 2023 in terms of mortgage affordability and costs, but there is further positive news in terms of falling mortgage product rates, and the anticipation is we’ll see this continue to track downwards. Our intention at Fleet, as always, is to get our range close to the 5% mark as we’re acutely aware of what this means for borrowers and their ability to both purchase new properties, but to also meet affordability and refinance.
“There is an appetite to add to portfolios where the numbers add up, and we’ve seen our own purchase business ticking up quarter-on-quarter. Again, our assumption is that a falling rate environment will give landlords more confidence and money to be able to buy, and while we don’t see remortgage/purchase business parity being on the cards anytime soon, we do think we’ll see more purchasing as a percentage of our business through the rest of 2024.”
Fleet Mortgages’ product guide and full list of lending criteria is available to view by visiting its website at: www.fleetmortgages.co.uk
