Ask ten landlords what a good rental yield is and you will get ten different answers, usually the figure from the last deal they bought. That is the problem with the question: a yield number means nothing without the costs behind it, the mortgage in front of it, and the place it was earned in. A 7% yield in a low-cost northern terrace and a 7% yield in a high-service-charge London flat are not the same investment, even though the headline looks identical.
This guide answers the question properly for 2026: what average yields actually are this year, why the old "5% is good, 7% is very good" rule of thumb now understates the market, and the tests that turn a yield figure into a judgement — net yield, yield on total cost, and after-tax cash flow. It is general information, not personal investment advice. Read it alongside the yield-calculation guide in this series, which works the formulas through line by line.
The short answer
In 2026, a good rental yield is one that survives contact with reality. The average gross yield across completed buy-to-let deals is above 7%, so a 7% gross yield is roughly average, not exceptional. A genuinely good deal in 2026 is one where the net yield on total cost — after running costs, stamp duty and buying costs — still leaves positive cash flow after mortgage interest and tax at a stressed rate. If it only works on gross yield, it is not a good yield; it is a good advertisement.
Three benchmarks, in order of importance:
1. Gross yield at or above the current average for its region and property type. Below-average gross yield needs a specific justification, such as strong capital growth prospects or unusually low running costs. 2. Net yield on total cost that clears your mortgage rate with room to spare. If your mortgage costs 5.5% and your net yield on total cost is 4.5%, the property is subsidising the tenant, not paying you. 3. Positive after-tax cash flow under stress. One month void, a 1% rate rise and a £1,000 repair in the same year should dent the return, not destroy it.
A property that passes all three is a good yield.
What average yields actually are in 2026
The most widely reported figures come from Paragon Bank's quarterly buy-to-let yields report, based on completed mortgage applications — actual purchase prices and actual rents, not asking prices or automated estimates. In the third quarter of 2026 (July to September), the average gross yield reached 7.22%, up from 7.00% in the second quarter and 6.94% in the third quarter of 2025. Paragon reported it as the highest average since the first quarter of 2011.
That rise is not a mystery. House price growth in the higher-yielding regions has been subdued through 2026, while rental demand has not softened in the same way, so rents have risen against flatter prices. Different lenders report different averages because their books differ — Fleet Mortgages' Q3 2026 Rental Barometer, for example, put the England and Wales average at 7.9%. Do not mix sources: compare a property against one consistent dataset, and remember that every lender average is a gross figure, before any costs.
Yields by region: the north-south split
Paragon's Q3 2026 regional averages show a sharp divide:
| Region | Average gross yield, Q3 2026 |
| East Midlands | 8.10% |
| North East | 8.02% |
| Scotland | 7.95% |
| North West | 7.88% |
| South West | 7.79% |
| Wales | 7.79% |
| East Anglia | 7.53% |
| West Midlands | 7.38% |
| South East | 6.58% |
| Greater London | 5.79% |
The pattern is structural: lower purchase prices in the North and Midlands mean rents make up a larger share of value. London sits over two points below the national average; the South East is the only other region below 7%.
A regional average is a starting point, not a target: individual properties in the same region can differ by several percentage points.
Property type matters as much as region. In the same Paragon quarter, houses in multiple occupation (HMOs) averaged 8.80% gross, multi-unit freehold blocks 7.36%, flats 6.66% and terraced houses 6.46%. HMOs top the table every quarter, but they also carry licensing, higher management intensity, higher wear and tear and higher void risk — costs that eat the headline advantage. Compare HMO yields with HMO costs, not with single-let costs.
Gross yield is the start, not the verdict
Gross yield is annual rent divided by property value, times 100. It is useful for one thing: quickly comparing listings. It is dangerous for everything else, because it assumes every penny of rent is kept and nothing ever goes wrong.
The worked examples in the yield-calculation guide in this series show how far gross and net can diverge. A £200,000 property let at £1,100 a month shows a 6.6% gross yield; with £3,200 a year in running costs, the net yield is 5.0%. A £185,000 flat let at £1,050 a month shows 6.81% gross and 4.65% net once management, voids, insurance, maintenance and certificates are counted. And once stamp duty and buying costs are included, a £250,000 house at 6.0% gross falls to 4.49% net on total cost.
That progression — gross, net, net on total cost — is the real answer to "is this yield good?" Always recalculate a quoted yield on total cost before comparing it with anything else.
The test that matters: yield against your mortgage
A yield is only good relative to what the money costs. The decisive comparison is between net yield on total cost and your mortgage interest rate, because that gap is what pays you — or what you pay.
Take the flat example above: 4.65% net yield on price, roughly 4.4% on total cost once buying costs are included. Against a 5.5% interest-only mortgage, that property loses money every month before tax, however good its gross yield looked on the listing. Leverage works in reverse when the mortgage rate exceeds the net yield: the return on your cash collapses, and for a higher-rate taxpayer, Section 24 tax can push it further negative.
The mortgage guide in this series explains the lender's version of this test, the interest coverage ratio (ICR). Lenders commonly require rent to cover stressed mortgage interest by 125% for basic-rate taxpayers and limited companies, and 145% for higher-rate taxpayers buying personally. A property can pass your yield test and still fail the lender's ICR test, or pass the ICR test and still lose money after tax. Run both, and look for net yield on total cost comfortably above your mortgage rate — enough that a 1% rate rise does not flip the property cash-flow negative.
Yield versus capital growth: the trade-off you cannot dodge
High yields and high capital growth rarely live in the same postcode. Lower-priced markets in the North and Midlands deliver stronger rental income relative to price, but historically slower price appreciation. Higher-priced markets, notably London and parts of the South East, deliver lower yields but have historically offered stronger long-term growth.
Neither side is "better" in the abstract. It depends on what you need the property to do:
- Income now: yield dominates. You need rent that covers costs, mortgage and tax with a surplus you can spend or reinvest. High-yield regions and property types suit this goal, provided you have budgeted honestly for their higher running costs and void risk.
- Wealth over decades: total return dominates. A London flat yielding 4% gross but appreciating steadily may outperform a northern terrace yielding 8% but standing still, once growth, costs and tax are all counted over ten or twenty years.
- Portfolio building: retained cash flow dominates. The limited-company guide in this series explains why landlords who reinvest profit care more about after-tax cash retained than about headline yield.
What drags a good-looking yield down
When a property's gross yield beats its regional average, check these five cost traps before celebrating:
1. Service charges and ground rent. On leasehold flats these can run to thousands of pounds a year and can rise sharply, especially where major works are planned. Always obtain the service-charge history before calculating yield on a flat.
2. Voids. A property empty for four weeks a year has lost roughly 8% of its annual rent. Budget a void allowance every year — 5% of rent, roughly two to three weeks, is a common planning assumption — and be sceptical of any yield that assumes 100% occupancy forever.
3. Management and compliance. Full management at around 10% of rent, landlord insurance, gas and electrical safety checks and EPC costs are contractual or statutory, not optional. The Renters' Rights Act changes in force since May 2026 also raise the cost of getting possession wrong, which makes good referencing and record-keeping a yield-protection measure, not admin.
4. Maintenance reality. A year with no repairs does not mean the property has no maintenance cost; it means the cost has been deferred. Judge maintenance over three to five years, and budget an annual reserve rather than zero.
5. Rent quality. Achieved rent beats asking rent. If comparable lets achieve £1,050 and one agent suggests £1,200, underwrite at £1,050. An inflated rent inflates gross yield, net yield, ICR and cash flow all at once.
So what should you target in 2026?
There is no single number, but there is a defensible way to set your own target:
1. Start from the regional average for your property type. In Q3 2026 that means roughly 8% gross in the East Midlands and North East, roughly 7.9% in the North West, roughly 6.6% in the South East and roughly 5.8% in London. Aim to beat your local average, not a national slogan. 2. Convert to net yield on total cost. Deduct every running cost, add stamp duty and buying costs to the denominator, and see what is left. 3. Test it against your mortgage and tax. Deduct mortgage interest at the actual product rate, apply your tax position (personal or company, basic or higher rate), and check the after-tax cash flow is positive. 4. Stress-test it. One month void, a 1% rate rise and a £1,000 repair in the same year. If it still works, the yield is good. If it only works when everything goes right, it is not. 5. Check the growth story separately. What evidence supports growth here, and what happens if growth is flat for five years?
Frequently asked questions
What is a good rental yield in the UK in 2026?
On Q3 2026 lender data, the average gross yield is 7.22%, with regional averages from 5.79% in Greater London to 8.10% in the East Midlands. A good yield beats the average for its region and property type on a net, total-cost basis and still leaves positive after-tax cash flow. A gross figure alone cannot answer the question.
Is 5% a good rental yield?
It depends where the property is. In Greater London (Q3 2026 average 5.79%), 5% gross is below average but may be acceptable if bought for long-term growth. In the North East or East Midlands (averages above 8%), 5% gross is weak for an income purchase. Judge it against the local average and your mortgage rate.
Is 8% rental yield good?
Usually yes, but verify it. An 8% gross yield beats the national average and matches the best regional averages. Check the rent is achieved rather than asking, running costs are fully deducted, and the property is not high-yielding because it is hard to let, hard to mortgage or falling in value.
Related reading
- How to Calculate Rental Yield: Gross vs Net (With UK Worked Examples)
- Buy-to-Let Mortgages for First-Time Landlords: Criteria, Deposits and Lenders (2026)
- Limited Company Buy-to-Let vs Personal Name: Which Is Better in 2026?
- Best Places to Invest in UK Property in 2026: Yields by Region
- Interest-Only vs Repayment Buy-to-Let Mortgages
- HMO Investment UK: Rules, Licensing and Yields