Scotland is home to the UK's highest-yielding buy-to-let markets, according to UK Finance, highlighting the growing importance of regional market selection for landlords navigating rising costs and tighter regulation.

The report found that despite a series of challenges for the buy-to-let sector, including higher stamp duty surcharges, the removal of mortgage interest tax relief and stricter lending criteria, every region of the UK saw growth in buy-to-let purchase activity during 2025.

However, investment returns vary significantly. The strongest-performing buy-to-let locations were all found in Scotland, where landlords can achieve gross rental yields of more than 9%.

In contrast, some of the lowest returns were recorded in England, including South Hams in Devon, where average yields stand at 5.0%, alongside Cambridge and the Derbyshire Dales at 5.3%, and Rutland at 5.4%.

The report also highlighted significant regional differences in borrowing. London landlords carry the highest average mortgage debt at £280,000, almost £70,000 more than the South East, while Northern Ireland has the lowest average mortgage debt at £99,500.

James Tatch, Head of Analytics at UK Finance, said: “Property prices, wages and demographics vary greatly across and within regions. All of these have an impact on affordability and if you're a landlord, how profitable your investment property is.”

He added that understanding local housing markets is increasingly important as landlords assess both the opportunities and challenges facing the sector.

The findings reinforce the growing shift towards regional buy-to-let investment, with affordability and rental yields increasingly outweighing capital appreciation when investors assess where to deploy their money.