Fleet Mortgages’ Q1 2022 Rental Barometer shows steady quarterly yield returns

Fleet Mortgages, the buy-to-let specialist lender, has today (18th April 2022) released the latest iteration of its Buy-to-Let Rental Barometer covering Q1 2022 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 2022 and Q1 2021.

Across England & Wales the Barometer shows a slight fall in rental yields, down from 6.3% a year ago to 5.7% during the first quarter of 2022, however this is up by 0.1% on the previous three-month period, Q4 2021.

All regions, except the North East, have seen a slight yearly drop in rental yields however half of the regions have actually improved yields when compared to Q4 2021, while the yearly drops are below 1% for all regions bar one.

The Northern regions continue to see the highest levels of rental yields across England and Wales. For the seventh consecutive quarter running, the North East of England has the top rental yield regional figure, increasing again to 8.7%. However, there has been some movement in the places below, with Yorkshire & Humberside and the North West moving into the top three.

Fleet suggests this is much to do with significant increases in demand around hotspot areas. These are generally situated in, and around, town and city centres such as Liverpool, Manchester and Sheffield.

Fleet said it continues to anticipate strong tenant demand right across England and Wales through the rest of 2022, however this might change towards the end of the year and into 2023, citing increases in mortgage rates, a tightening of Government policies, and other pressures on household incomes, as having a specific impact.

It said buy-to-let mortgage rates had increased moderately during Q1 2022 with lenders absorbing increased funding costs in order to maintain volumes. Fleet expects rates to continue rising into the latter stages of 2022 as it suggested it was unlikely lenders would continue to absorb both Bank and swap rate increases.

Steve Cox, Chief Commercial Officer at Fleet Mortgages, commented: “In our previous forecast, we anticipated demand for rental properties would continue to be strong into 2022, while also seeing a relative increase in mortgage interest rates, and that has certainly proven to be the direction of travel for the market.

“This demand-side strength, coupled with relatively tight supply, means rental yields continue to be strong, and that overall – across England and Wales – we have seen an increase in levels compared to the last quarter of 2021.

“On a yearly basis, it’s clear that rental yields have dipped very slightly, but that comparison doesn’t tell the whole story by any means, and the shorter-term analysis has to focus on the still, very strong figures fuelled by tenant demand, with the future forecast likely to be more of the same. At least until towards the end of the year.

“Looking further ahead, it’s likely that landlords are going to need to cut their cloth accordingly when it comes to setting rents, especially given the large increases in the cost of living that tenants are clearly not immune from and will need to be factored into rent levels.

“Overall, it’s obvious that property investment retains its allure as a strong asset class, and that the good news for landlords is the supply of finance from lenders like Fleet remains very strong with rates still at highly competitive levels.

“As we move through the year it is likely that rates will inch up though, however there are a wide range of opportunities for all types of landlords, wanting to purchase or refinance all types of rental properties, and that this should help bring much-needed supply into the PRS.”