Total gross rental yields rose to 7.02% at the end of June, up from 6.96% at the end of the first quarter, Paragon data showed.
The lender’s second-quarter buy-to-let (BTL) returns report shows returns are on an upward trajectory since the end of Covid lockdowns, rising from 5.84% in 2021.
Regionally, Scotland saw the strongest growth in return performance during the quarter, up 53 percentage points to 7.97%.
Landlords in the West Midlands recorded an increase of 24 percentage points to 7.24%, while those in Yorkshire & Humber rose by 21 percentage points to 7.58%.
Conversely, landlords in Greater London experienced the sharpest fall in rates, falling by 16 percentage points to 5.58% over the quarter.
Wales retained its position as the highest yielding location at 8.87%, with Scotland’s strong rise seeing it move into second place alongside the North East, where both returned 7.97%. London (5.58%) and the South East (6.48%) retained their positions as the regions with the lowest returns.
Meanwhile, data by property type shows that HMOs remained the highest yielding type of property at 8.90%, up 14 percentage points, followed by multi-unit blocks at 7.18%.
The apartments (6.45%) and terraced houses (6.31%) also scored high from the perspective of gross rental yield.
Louisa Sedgwick, mortgage director at Paragon Bank, said: “In the second quarter we saw further strengthening of gross rental yields, continuing the positive trajectory we have seen in recent years.”
“While the pace of developments varies by region, the overall picture remains one of resilient returns for landlords, supported by continued tenant demand and more moderate house price growth in parts of the market.”
“Wales continues to lead the regional returns table, while Scotland, the West Midlands and Yorkshire and the Humber all recorded notable quarterly improvements.”
“HMOs also remain the highest yielding property type, underlining the importance of more specialist rental properties in delivering stronger income returns for landlords where there is clear local demand.”