During the first quarter of 2021 average rental yields increased to 6.0%, the highest recorded in three years, according to research by Paragon Bank, which also revealed that rental yields have climbed by 0.2 percentage points from 5.8% in Q4 2020 to 6.0% in Q1 2021. This represents a year-on-year increase of 0.7pp after landlords said they were able to generate average yields of 5.3% in Q1 2020. 

As part of a survey of just under 900 landlords, carried out by BVA BDRC on behalf of Paragon Bank, landlords were asked what rental yield they currently receive, taking into account rental income as well as any mortgage, maintenance and other costs associated with running their letting portfolio. 

The results demonstrated that investors’ ability to generate income is in part impacted by where their properties are located. The highest average rental yields are currently achieved by those managing lettings businesses in the South West (6.7%) and North East (6.6%). Landlords with property in Central London continue to achieve the lowest yields at 5.4%, due to higher average property prices in the capital. 

Richard Rowntree, managing director for mortgages at Paragon said: “Rental yields are a key measure for landlords so it’s encouraging to see them indicate being able to generate average yields of 6.0%.”