A prominent buy to let mortgage lender has issued an upbeat forecast for 2025.
This is despite stubbornly high interest rates, the imminent Renters Reform Bill, and more obstacles for the sector such as extra licensing powers for councils.
Steve Cox, chief commercial officer at Fleet Mortgages, says: “There is certainly a greater degree of positivity around the buy-to-let market now than at this time last year, even with the Budget decision to increase stamp duty surcharges for landlord purchasers.
“Our Rental Barometer reflects that optimism over the last quarter of 2024, with average rental yields – on the whole – continuing to improve, albeit at a slightly slower rate, but also in terms of Fleet’s figures for average monthly rents, average rates, average loan sizes, rental cover, and application numbers for property purchases.
“Certainly, many landlords were waiting for the Budget before making decisions, but even with the stamp duty increase, at least they now have certainty about the future, can plan accordingly, and as mentioned, the financial position is positive which will allow more landlords to act and to add to portfolios where appropriate.
“In our view, all of this points to a more positive market for buy-to-let in 2025, especially if we see rates fall steadily, as anticipated, while at the same time, tenant demand remains strong, while the supply of properties in the private rental sector is still not enough to meet this demand.
“Our views are clearly shared by others in the marketplace, most notably the Intermediary Mortgage Lenders Association. Its recent review of 2024 and preview of 2025 paints an encouraging picture for buy-to-let with an estimate of £33.2 billion of gross lending in 2024, which would be 10% up on 2023.
“Its outlook for the future is also positive, predicting £38 billion of buy-to-let gross lending this year and up again to £42 billion in 2026, arguing this improvement will come from greater landlord activity fuelled by lower rates, improved affordability, and a continuation in strong rental yields.
“Overall as we begin 2025, our expectation is for a strong year of lending activity and business, with a higher degree of demand, both from established landlords and – encouragingly – from first-time borrowers.”
Fleet has just issued a new report highlighting rental yields in UK regions.
Region | 2023 Q4 | 2024 Q4 | y/y change |
North East | 8.0% | 9.3% | 1.3% |
Yorkshire and Humberside | 7.6% | 8.6% | 1.0% |
North West | 8.0% | 8.3% | 0.3% |
Wales | 7.7% | 8.2% | 0.5% |
East Midlands | 6.5% | 7.7% | 1.2% |
South West | 6.3% | 6.9% | 0.6% |
West Midlands | 7.1% | 6.6% | -0.5% |
South East | 5.8% | 6.4% | 0.6% |
East Anglia | 6.0% | 6.3% | 0.3% |
Greater London | 5.6% | 5.8% | 0.2% |
England & Wales (Total) | 6.8% | 7.4% | 0.6% |
The total average yield for England and Wales is 7.4%, showing an annual increase of 0.6% on the same quarter in 2023, and 0.2% up on the previous quarter.
Fleet said rental yields remain almost universally positive, with only one region in England and Wales, the West Midlands, showing a year-on-year fall. However, compared to the previous quarter, three regions – Greater London, the North East and the West Midlands – have all seen reducing yields.
The North East continues to lead the average rental yield table at 9.3% with Yorkshire & Humberside moving up to second place with 8.6%, above the North West with 8.3%, which occupied second place in the last Barometer.
Having dropped down the list in Q3 2024, Wales has moved back up with a 0.5% year-on-year increase delivering a quarterly rental yield of 8.2% while the East Midlands continues to show strong growth, showing a year-on-year increase of 1.2%, however this has slowed recently, up only 0.2% on the last quarter.
Fleet said that, averaged out across England & Wales, rental yields were broadly static compared to a year ago.