Jeni recaps a transitional year for landlords, falling mortgage costs, record rental yields, shifting tenant demand, and confidence trends, plus much more. Discover what’s next for 2026 and beyond.
First and foremost, I hope you are well and that 2025 has been kind to you.
As is somewhat of a tradition, I wanted to write to you and share some thoughts about what we have seen in the last 12 months, and where we think things will go over the next 2–3 years.
If I were to summarise 2025 as a landlord, I would use the word transitional. This year, we’ve been on a downward trajectory in mortgage costs, and we’ve spent most of our time waiting for the Renters’ Rights Act (RRA) and the Autumn Statement. Thankfully, we end the year with the latter two reaching some kind of clarity (more on this to follow), but it’s not a clean finish.
Rates are likely to continue decreasing, albeit at a slower pace, in 2026. The granularity and “how it works in the real world” element of the RRA will only become clear once it takes place in May 2026, and let’s not forget we have the MEES changes to be thinking about too.
One thing is for sure: things never stand still in the PRS. Yet landlords continue to amaze me with their resilience and agility when it comes to positively managing change, most notably demonstrated by the large number of landlords we work with who are continuing to grow their portfolios and see the future as bright.
Before we leave 2025 behind us, I have compiled some useful insights into our sector, which I hope you will find helpful. For landlords getting ready to gear up for the new year, this is an essential read to help you plan ahead.
Average rental yields
Average rental yields across the UK are now at their highest since 2011, at a staggering 7.11%, with a 0.4% increase from last year.
This increase in yields is largely due to strong growth in rents driven by high tenant demand and lower rental stock, as well as the slow rise in house prices.
On a regional basis, the table below highlights where to focus your future investments to access the most generous rental yields available:
| Region | Average Rental Yield |
| Wales | 8.40% |
| North / North East | 7.90% |
| Scotland | 7.60% |
| North West | 6.80% |
| Yorkshire & The Humber | 6.50% |
| West Midlands | 6.20% |
| East Midlands | 6.00% |
| South West | 5.60% |
| South East / East of England | 5.5-5.6% |
| Greater London | 5.7-5.8% |
Source: Paragon Bank and Zoopla
House prices
According to Halifax, the current average house price in the UK is £299,862, a 1.9% increase year-on-year.
However, regional differences persist, with some areas experiencing rapid growth while others stagnate.
| Region | Approx. House Price Growth |
| Northern Ireland | 8.90% |
| Scotland | 3.70% |
| North West (England) | 3.20% |
| North East (England) | 2.90% |
| Wales | 1.90% |
| South East (England) | -0.30% |
| London & Greater London | -1.00% |
Source: Halifax House Price Index
Notably, the South of the UK has experienced little or no growth. Here, the housing market is particularly challenged over mortgage affordability linked to lending regulations and higher mortgage costs. However, both of these have improved over the year, and we therefore expect these regions to move into growth through 2026.
Tenant demand
Whilst demand for rental properties continues to outstrip supply, the balance is beginning to shift. Zoopla’s latest rental market report reveals that demand has fallen by a fifth in the last year, with supply on the rise and 15% more homes for rent than this time last year.
Zoopla explains that this drop in rental demand is driven by two key factors: a large decline in net migration, and improved affordability for first-time buyers.
The UK is on track to see more than 350,000 people buy their first home in 2025. As many of these buyers were previously renters, this accounts for the increase in supply.
However, this does not signal weaker rental markets. Average rental yields remain at 7.11%, and rising rents have encouraged tenants to stay in properties for longer. With more homes coming to market, this trend may begin to reverse.
Landlord profiles
The latest Buy to Let Market Barometer by The Mortgage Works (Q3 2025) provides insight into landlord confidence and plans.
Landlord confidence
- 35% feel “good” or “very good” about their letting business (up from 32%)
- 34% feel positive about rental yields (down from 36%)
- 14% feel positive about capital gains (unchanged)
Landlord plans
- 7% intend to buy in the next 12 months
- 40% intend to sell in the next 12 months
While this appears stark, many landlords are selling lower-yielding or poor EPC assets to optimise their portfolios rather than exiting the market entirely.
Landlord income
Average annual gross rental income now stands at £79,000. Limited Company landlords earn significantly more, with an average of £157,000 annually.
Next Steps
As always, if you have any questions or need tailored advice, please don’t hesitate to get in touch. Wishing you a wonderful Christmas and a successful 2026!
Call our experts on 0345 345 6788 or submit an enquiry here to see how we can help.
