Data released by Landlord Mortgages on rental yields reveals that they hit a five-year low in 2006, with Scottish rental returns going down by 1.54% to 6.46%, and English returns falling from 7.1% to 5.74%.
Despite this, Alliance & Leicester says that over half of all landlords intend to remain in the market for more than 10 years.
To stay in the market, an A&L survey finds that 38% of landlords will increase rents and another third will do nothing. Only 2% are likely to sell some of their property.
Lee Grandin, managing director of Landlord Mortgages, says: “The cost of the average property has risen by 66% over the past five years, while rents have risen slightly above inflation.
“This has created an environment in which investors should be less concerned about high rental yield figures and more about achieving the rent to cover mortgage repayments.”
Mehrdad Yousefi, head of intermediary mortgages at A&L, says: “Landlords will continue to see good returns as long as there is a demand for rented property, but they would do well to plan for less profitable periods.”