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Higher rents boost yields on buy to let

Buy-to-let activity has remained consistently strong despite concerns over rising borrowing costs.

Figures from Paragon Mortgages show that landlords have been raising rents and buying new properties.

Average buy-to-let rents have risen by 6.5 per cent over the past quarter from £9,942 in January to £10,591 in April, according to Paragon’s buy to let index.

Total returns, taking account of capital appreciation and rental yield, increased from 8 per cent in January to 11.6 per cent in April.

Several regions, including East Anglia, the South-west, Wales and the West Midlands, achieved total returns that were significantly above the national average.

Managing director John Heron says: “Investors are encouraged by the strength of tenant demand, which enables them to increase rents on existing tenancies when they are renewed and apply a higher rent to new tenants than they would have charged three or six months ago. Total returns are higher now than they were in January and yields remain firm at 6.1 per cent for the third successive month.”

Mortgage Force managing director Rob Clifford says buy-to-let mortgages now represent a fifth of its financial advisers’ business, nearly double last year’s figure, reflecting the sector’s buoyancy.

He says: “The buy-to-let market is now becoming oversupplied and competitive with more deals available. Landlords now need more advice on the products.”

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