Rental yields stabilise at 6.4%

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by Gill Montia

Paragon Mortgages has published its June Buy-to-Let Index which shows yields remaining unchanged from May, at 6.4%.

On a regional basis, the areas achieving the highest yields in June were as follows: Wales 7.6%; the North 7.4%; North West 7.3%.

The average rent paid by a tenant showed little movement from May, at just under £1,000 per month (9.3% above the June 2007 average).

The lender is confident that strong tenant demand resulting from the downturn in the housing market will encourage landlords to remain in the sector and add to their portfolios.

According to Paragon, many landlords are well placed for further investment in the sector because the average portfolio gearing is below 40%.

John Heron, the firm’s managing director, believes that the private rented sector is a vital source of stability in an uncertain housing market and is providing a viable alternative to owner occupation.