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Buy to let yields hit six year high

The average gross rental yield reported by landlords has reached the highest level since the second quarter of 2018, according to Paragon Bank.

After increasing for the third successive quarter, average gross rental yields reported by landlords hit 6.1% in Q1 2024. This is the first time average yields have surpassed the 6% mark since the end of 2021 and the highest since Q2 2018 when average yields of 6.2% were achieved by landlords.

Almost 800 landlords were asked about their current gross rental yield. It highlighted how Houses in Multiple Occupation have the potential to generate higher rental yields compared to single self-contained properties - 7.0% vs. 5.8% on average.

Richard Rowntree, Paragon Bank managing director of mortgages, says: “Against what has been a challenging economic backdrop, landlords are naturally looking for ways to maximise returns, but they are also attempting to mitigate the impact of a tax burden that has increased in recent times. Alongside their yield generation potential, HMOs appeal to investors because of strong demand for affordable homes, particularly in areas where tenants would perhaps not be able to afford to buy or rent a whole property. This is particularly evident at the moment, with high levels of rental inflation. Alongside a stabilisation of house prices, it is likely that this has contributed to improving yields.”

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