"This latest Rental Barometer shows a very positive picture for much of Q1, with rental yields rising across every region in England and Wales on an annual basis, and only one region showing any sort of quarterly dip"
- Steve Cox - Fleet Mortgages
Rental yields across every region of England and Wales rose on an annual basis in the first quarter of 2026, according to Fleet Mortgages' latest Buy-to-Let Rental Barometer.
Average yields reached 8.1% nationally, up 0.7% year-on-year and 0.4% quarter-on-quarter, pointing to resilient tenant demand and continued income potential for landlords despite a market backdrop that deteriorated sharply towards the end of the quarter.
The data covers Q1 2026 compared with Q1 2025 and draws on lending activity across Fleet Mortgages' buy-to-let portfolio.
North leads but southern regions also gain ground
The North East retained its position as the highest-yielding region, rising 0.6% annually and 0.2% quarterly to reach 9.8%. Six regions now record average rental yields above 8%: Yorkshire and Humberside, the West Midlands, the North West, Wales, the East Midlands, and the North East itself.
Fleet's data continues to highlight a divergence between northern and southern markets, with higher-yielding areas in the North and Midlands outperforming the South. However, yields in the South West and South East also moved higher during the quarter, suggesting tenant demand is broad-based rather than concentrated in any single part of the country. Greater London was the one exception, recording a slight quarterly dip in yield.
"This latest Rental Barometer shows a very positive picture for much of Q1, with rental yields rising across every region in England and Wales on an annual basis, and only one region showing any sort of quarterly dip," said Steve Cox, chief commercial officer at Fleet Mortgages.
"That reflects the strength of tenant demand and the ability of landlords to generate solid income returns, with average yields now sitting above 8% nationally.
"We have also seen more regions moving above that 8% level, particularly across the North and Midlands, but it's equally encouraging that yields have continued to rise across the South as well, pointing to a broad base of demand right across the country."
Market volatility clouds the Q2 outlook
The positive yield picture comes with a significant caveat. While January and February saw relatively stable conditions and easing mortgage pricing, March brought a sharp shift. Rising swap rates, driven in part by geopolitical developments, triggered product withdrawals and rate increases across the buy-to-let lending market.
Fleet notes that buy-to-let is particularly sensitive to funding cost movements, making it more exposed than other lending categories when swap rates spike.
Average two and five-year fixed rates fell quarter-on-quarter during Q1, and Fleet's own average rates moved in the same direction. That improvement, however, largely reflects conditions in the first two months of the quarter rather than the environment lenders and brokers are now operating in.
Cox was direct about the contrast between the data period and current conditions. "The market we are operating in today looks very different and continues to be extremely volatile for obvious reasons. The impact of global events, particularly in the Middle East, has driven a sharp increase in swap rates, leading to product withdrawals and higher pricing across the market. This is likely to have a much greater impact on activity as we move through Q2, especially on the purchase side."
Purchase transactions were already showing signs of softening before the volatility intensified. The proportion of applications received for purchase business slipped from 37% in Q4 2025 to 33% in Q1 2026. Fleet expects that figure to fall further, with purchase lending likely to bear the brunt of current conditions more heavily than remortgage and product transfer activity.
Portfolio landlords and limited company borrowing on the rise
Other indicators from the Q1 barometer were more encouraging. Average loan sizes increased to £210,000, while limited company borrowing accounted for 78% of all applications, reflecting the continued shift among landlords towards more tax-efficient ownership structures.
Borrowers with four or more properties represented over 63% of applications, and the proportion of landlords holding 15 or more properties grew to 30% during the quarter.
"We are continuing to see landlords looking to grow their portfolios, larger portfolio operators increasing their presence, and a sustained shift towards limited company borrowing," Cox noted.
"So while the market backdrop has clearly shifted in recent weeks, the combination of rising yields, strong tenant demand and ongoing investor appetite means buy-to-let remains well supported, even as it adjusts to a more uncertain financing environment."
The underlying fundamentals of the UK private rental sector, Fleet argues, remain intact. Supply constraints, sustained tenant demand and the income returns available in higher-yielding regions continue to support the case for buy-to-let investment, even as the financing environment becomes more complex heading into the second quarter.
