Foundation Home Loans Q2 2026: East Midlands landlords report 7.3% average yields and 92% profitability, both UK records. When a region quietly produces the country's best yields and the highest profitability rate, in a market where most of the headlines are about landlords leaving, that is worth paying attention to.
What Has Happened?
Foundation Home Loans, working with Pegasus Insight, surveyed active UK landlords for its Q2 2026 Landlord Trends Report. The overall picture is a sector that has contracted significantly in transaction terms but remains operationally profitable for most of those who stayed. Nationally, 86% of landlords reported making a profit from their lettings business in Q2 2026. Average portfolio value across respondents was £1.8m. Gross rental income per property averaged £12,007 per year, which comes out at roughly £1,001 per month. Average gross yield across the full survey was 6.4%.
Those national figures mask enormous regional variation. Foundation broke the yield data down by UK region and the East Midlands came out on top at 7.3%, tied with the East of England. Yorkshire and the Humber followed at 6.8%. The North East recorded 6.6%. The West Midlands and South West both came in at 6.5%. Greater London, which often occupies most of the column inches in coverage of the rental market, recorded a yield well below the national average, as it has done consistently since Section 24 tax changes removed the leveraged return that once made London yields more palatable against higher entry prices.
On profitability by region, the East Midlands again led the table. At 92% of landlords in profit, it topped every other UK region. The West Midlands followed at 90%. The East of England and South West were both at 89%. The South East came in at 87%. The national figure of 86% includes London, which pulls the average down. These profitability percentages are based on landlords' own assessments of their portfolio performance in Q2 2026, covering rental income against running costs including mortgage interest, management fees, maintenance, and compliance expenditure.
The transaction data in the same report tells a quieter story about what has happened to supply. In the past twelve months, 22% of the landlords surveyed sold a property. Only 6% bought one. The regions with the highest rates of landlord selling were the North West at 30% and Yorkshire and the Humber at 29%. The East Midlands recorded a 25% selling rate, below both. That means even in the UK's most profitable BTL region by Foundation's own data, one in four landlords sold a property in the last year, and fewer than one in twelve bought one.
Why This Matters to UK Property Investors
The 7.3% regional average yield figure for the East Midlands is a composite of very different local markets. Derby's average BTL property price sits at around £159,000 with monthly rents of roughly £860, producing gross yields in the 6.4% to 6.7% range. Leicester's average rental income has risen to approximately £1,026 per month against average property prices of £236,000, pushing gross yields toward 5.2% on average but with specific postcodes such as LE1 reaching 5.9% to 6.5%. Nottingham is where the regional average gets pulled upward. Selected Nottingham postcodes, particularly NG7 (Radford, Forest Fields, Lenton) and NG3 (Mapperley, Sneinton), record gross yields of 8% to 9.5% on terraced and purpose-built student-adjacent stock.
A 7.3% regional average yield against current company BTL five-year fixed rates of 5.2% to 5.4% from lenders like Foundation, Paragon, Fleet Mortgages, and Precise leaves a gross-to-finance spread of 1.9 to 2.1 percentage points before management and voids. That spread is tighter than what the North East offers at comparable rates against its 9%+ postcode yields. But it applies to a significantly larger pool of available stock and a broader range of property types, including Leicester city-centre flats (student and professional), Derby terraced housing close to the hospital and university, and Nottingham terraces that let consistently to working households rather than students alone.
The 92% profitability figure from Foundation matters because it is not a yield calculation. It is landlords reporting their actual experience of running a portfolio in Q2 2026, after paying mortgage interest at current rates, managing agents' fees, maintenance, and the compliance costs introduced by the Renters' Rights Act since May 2026. Eight percent of East Midlands landlords are making a loss or breaking even. Ninety-two percent are not. In a sector where compliance costs have increased meaningfully this year and where some landlords in other regions are genuinely struggling with payment shock from rolling off cheap fixes, the East Midlands profitability figure is a statement about the economics of that specific regional market, not about the sector in general.
The 25% selling rate in the East Midlands is below the North West and Yorkshire figures, but it is still substantial. One in four East Midlands landlords sold in the past year. At current transaction volumes in the East Midlands private rented sector, that translates to a meaningful flow of rental properties coming to the open market or changing hands between investors. The Foundation data does not separate which of those sales were distressed exits versus planned portfolio restructuring, but the combination of higher yields and higher profitability in the same region where a quarter of landlords are selling anyway is an unusual setup. Sellers in a profitable market are often selling for reasons unrelated to the market itself: compliance fatigue, age, capital gains tax planning, or simply portfolio consolidation. Those motivations create deals that do not reflect the underlying investment economics.
The Risks Investors Need to Understand
A 7.3% regional average yield does not mean every property in the East Midlands yields 7.3%. Derby at an average entry price of £159,000 and rents of £860 per month is producing closer to 6.5% gross on a portfolio basis. Investors who underwrite on the regional average figure and then acquire property in Derby city centre at 5.8% gross are not getting the headline deal. Postcode-level due diligence matters here in a way that it does in every region. The regional average is a starting point, not a proxy for individual property arithmetic.
Nottingham's high-yield postcodes come with specific compliance requirements. The city operates a mandatory HMO licensing scheme and a selective licensing scheme covering large areas of NG7 and NG3, the same postcodes where 8% to 9.5% yields are achievable on student-adjacent and working household stock. Selective licence fees run at approximately £700 to £1,000 per property over the licence period. More significantly, some of the highest-yielding Nottingham streets have Article 4 directions restricting C4 HMO use. Anyone buying a three or four-bed terrace in NG7 assuming HMO use is automatically permitted needs to check the planning position before committing.
The Foundation survey reflects Q2 2026 data collected in a period before the full weight of Renters' Rights Act compliance costs had been absorbed. Section 21 was abolished on 1 May 2026. The mandatory landlord database registration requirement has not yet fully landed on all portfolios. The Decent Homes Standard for the private rented sector, confirmed but with implementation timelines still partly unclear, will add further compliance costs. Landlords who are currently in the 92% profitable cohort may find that Q4 2026 and 2027 profitability is modestly lower as those costs accumulate. East Midlands' lead should hold, but the absolute profitability margin may compress somewhat.
Mortgage rates are the single largest external variable right now. Foundation Home Loans' own two-year fixed BTL rates, which sit in the 5.3% to 5.6% range for standard residential stock at 75% LTV, are 86 to 116 basis points above what they were in February 2026. A £150,000 BTL purchase at 75% LTV (£112,500 borrowed) at 5.5% costs £515 per month interest-only. Against a Derby-level rent of £860, the gross margin is £345 per month. Useful, but not wide. If rates rise a further 50 basis points and rents do not follow quickly, the margin compresses. Running the numbers at 6% rather than current rates is the honest underwriting test.
Where the Opportunity Could Be
Nottingham NG7 is where the East Midlands yield story is most concentrated. Radford and Forest Fields specifically produce terraced stock in the £120,000 to £150,000 range that lets consistently to working households, NHS staff, and postgraduate students at rents of £850 to £1,000 per month on two-bed configuration. At £135,000 purchase and £925 per month rent, gross yield is 8.2%. On a 75% LTV company BTL mortgage at 5.4% on £101,250 borrowed, the interest-only payment is £456 per month. Against £925 income, the pre-management margin is £469 per month. Against roughly £42,000 of equity deployed (25% deposit of £33,750, SDLT at the 5% additional dwelling rate of £6,750, and legals and valuation of around £1,500), annualised gross cash flow is £5,628. That is around a 13.4% gross cash-on-cash return before voids and maintenance.
Derby DE1 and DE22 (Darley Abbey, Strutton) are worth attention for a slightly different buyer type. Both postcodes have a professional rental demographic anchored by the Royal Derby Hospital and the University of Derby. Average entry prices run from £140,000 to £175,000 on two and three-bed terraced houses. Rents of £775 to £895 per month produce gross yields of 6.5% to 7.5% depending on the specific street. Derby does not have the same headline yield as Nottingham NG7, but it also does not carry the same Article 4 risk for investors not targeting HMO use. Single-let two-bed terraced housing in Derby DE1 is straightforward to let and manage with a consistent working household tenant base. Foundation's research implies East Midlands yields average 7.3% across all tenure types; the Derby portion of that average sits at the lower end but above the 6.4% national mean.
Leicester LE2 and LE4 are producing an increasingly interesting investment case following three years of above-average rent growth. Leicester's average monthly rent crossed £1,026 in March 2026, up 4.4% year on year. Property prices in LE2 (South Knighton, Stoneygate) remain elevated at £250,000 to £350,000, limiting yields to 3.5% to 4.5% on traditional family stock. But LE4 (Belgrave, Rushey Mead) offers two-bed terraced housing at £145,000 to £175,000 with rents of £850 to £950 per month, generating gross yields of 6.8% to 7.9%. The tenant demographic here is working-age households with stable employment rather than a student market, which matters for void periods and tenancy continuity under the new periodic tenancy structure introduced by the Renters' Rights Act.
The 25% East Midlands landlord selling rate that Foundation found in Q2 2026 creates a specific sourcing opportunity. Landlords exiting a profitable region are selling for their own reasons, not because the market has deteriorated. That means the properties coming to market from those sellers are not impaired assets. They are income-producing rentals being sold by people managing an estate, downsizing a portfolio, or taking capital gains ahead of the October Budget. A buyer who can identify that cohort through letting agents managing those portfolios, or through landlord-to-landlord sourcing networks active in Nottingham, Derby, and Leicester, is accessing genuine sellers at prices that reflect personal motivation rather than market distress.
Arsh's Investor View
I have invested in the East Midlands for about twelve years now, primarily in Nottingham and the surrounding area. The region never gets the same headlines as the North East or Manchester in the national property press, and I think that works in buyers' favour. The data that Foundation published last week is not surprising to me. It confirms what I have seen in deal flow and tenant demand for several years: the East Midlands produces reliable income from a broad range of property types and price points, and the economics work at current rates in a way they simply do not in London and most of the South.
The 92% profitability figure is the one I keep coming back to. That is not a yield calculation on paper. That is what landlords are actually experiencing in their bank accounts after paying the mortgage, the management agent, the boiler repairs, and the licence fees. Ninety-two percent are still making money in this environment. At 5.3% to 5.5% mortgage rates, that takes a decent yield to achieve. The East Midlands delivers it. A fair number of other regions do not, particularly where entry prices are high and rent growth has lagged.
The one thing I would add to the Foundation picture: the 25% selling rate in the East Midlands has a somewhat different character than in the North West or Yorkshire. In the North West, I know landlords who are selling because compliance in Manchester is genuinely expensive and because they bought at high prices before stamp duty changed. In the East Midlands, most of the sellers I have dealt with recently are selling because they have retired, or because they are simplifying a portfolio, or because they want to realise a capital gain before October. Those are not the same as distressed sales. But for a buyer with finance ready and postcode research done, the outcome is similar: a property in a profitable region at a price that reflects the seller's personal situation rather than the market's fundamentals.
Honest caveat: I am looking at specific streets in NG7 and DE22 right now. Not because I expect capital growth in the short term. I am buying for income. If prices move upward over a three to five year hold, that is a bonus. The underwriting has to work at current rates, with current rents, and current void estimates. It does in those markets. That is all I am saying.
How Property Investor App Can Help
Property Investor App gives investors direct access to live BTL deals across the East Midlands, including Nottingham NG7, Derby DE1 and DE22, and Leicester LE4, with gross yield figures pre-calculated and property type and tenure clearly flagged. For investors targeting the East Midlands as the UK's highest-yield and most profitable BTL region per Foundation's Q2 2026 data, PIA's deal feed includes landlord-to-landlord sales from the 25% of East Midlands landlords who sold in the past year, off-market properties from local sourcers, and open-market listings with rent comparables attached. For investors comparing East Midlands against North East and North West yield and profitability data before making a regional allocation decision, PIA provides a single deal platform covering all three regions side by side. For investors at the finance stage, PIA connects with specialist mortgage brokers covering Foundation Home Loans, Paragon, Fleet Mortgages, Precise, and the full specialist BTL lender panel across limited company and personal ownership structures. Browse live UK property investment opportunities at Property Investor App.
Key Takeaways
- Foundation Home Loans Q2 2026 Landlord Trends Report (produced by Pegasus Insight): the East Midlands recorded the UK's highest average BTL yield at 7.3% in Q2 2026, tied with the East of England. Both regions sit well above the national landlord survey average of 6.4%. Yorkshire and the Humber came third at 6.8%, followed by the North East at 6.6%, and the West Midlands and South West at 6.5% each.
- East Midlands recorded the highest landlord profitability rate in the UK at 92% in Q2 2026, meaning 92% of East Midlands landlords reported making a profit from their portfolio after mortgage interest, management fees, maintenance, and compliance costs. West Midlands followed at 90%, then East of England and South West at 89%, and South East at 87%. The UK-wide figure is 86%.
- The Foundation survey found 22% of landlords UK-wide sold a property in the past twelve months, against only 6% who bought. The North West recorded the highest selling rate at 30%, followed by Yorkshire and the Humber at 29%. The East Midlands recorded a 25% selling rate, below both. Properties being sold in the East Midlands are predominantly being sold for personal reasons (retirement, portfolio consolidation, pre-Budget capital gains crystallisation) rather than because of market deterioration.
- Nottingham NG7 (Radford, Forest Fields, Lenton) is producing gross yields of 8% to 9.5% on two-bed terraced stock at £120,000 to £150,000 with rents of £850 to £1,000 per month. Derby DE1 and DE22 produce 6.5% to 7.5% gross on professional-tenant terraced housing at £140,000 to £175,000. Leicester LE4 (Belgrave, Rushey Mead) is producing 6.8% to 7.9% on two-bed terraced stock at £145,000 to £175,000 with rents up 4.4% year on year to March 2026.
- The East Midlands average property price of £244,000 sits £51,000 below the UK average of £295,000. Lower entry prices at the same regional yield level (7.3%) mean proportionally lower absolute cash requirements for the same yield return. On a £135,000 Nottingham NG7 BTL at 75% LTV, total equity deployed including deposit, SDLT, and costs is roughly £42,000. The gross-to-finance spread at 7.3% average yield versus 5.2% to 5.4% BTL five-year fixed rates leaves 1.9 to 2.1 percentage points before management and voids.
Frequently Asked Questions
Which UK region has the highest buy-to-let yield in 2026?
According to Foundation Home Loans' Q2 2026 Landlord Trends Report, produced by Pegasus Insight, both the East Midlands and the East of England recorded the UK's highest average BTL yield at 7.3% in Q2 2026. Yorkshire and the Humber came third at 6.8%, followed by the North East at 6.6% and the West Midlands and South West at 6.5% each. The national landlord survey average was 6.4%. Greater London and the South East sit materially below the national average due to higher entry prices against rental income that has not risen proportionally. The East Midlands result is driven primarily by Nottingham's high-yield postcodes in NG7 and NG3, where terraced stock at £120,000 to £150,000 generates gross yields of 8% to 9.5% from working household and postgraduate tenants.
Is buy-to-let still profitable in 2026?
Foundation Home Loans' Q2 2026 survey found 86% of UK landlords reported making a profit from their portfolio in the quarter. In the East Midlands, the figure was 92%. Profitability is based on actual experience: rental income against running costs including mortgage interest at current rates (5.3% to 5.5% for typical BTL products), management fees, maintenance, and compliance costs introduced by the Renters' Rights Act. The minority of landlords not making a profit are concentrated in higher-LTV positions in lower-yield markets, where the combination of Section 24 tax restrictions, current mortgage rates, and compliance costs pushes net income below zero. For investors underwriting on gross yields above 7% with sensible LTV positions, profitability at current rates remains achievable.
What are the best areas in Nottingham for buy-to-let investment in 2026?
Nottingham NG7 (Radford, Forest Fields, Lenton) and NG3 (Mapperley, Sneinton) are producing the highest gross yields in the city at 8% to 9.5% on two-bed terraced stock. Entry prices in these postcodes typically run from £120,000 to £155,000, with monthly rents of £850 to £1,000 from working households and postgraduate students. NG1 and NG2 are more mixed: NG1 city centre yields 6% to 7.5% on purpose-built flats aimed at professional tenants, while NG2 produces lower yields on family housing. Important compliance note: large sections of NG7 are covered by Nottingham City Council's selective licensing scheme, with licence fees of £700 to £1,000 per property. Some streets also have Article 4 directions restricting HMO use, so postcode-level planning checks are essential before committing to a purchase intended for HMO operation.
Why are landlords selling in the East Midlands if it is the most profitable region?
The 25% selling rate among East Midlands landlords in Foundation's Q2 2026 survey does not mean the region is unprofitable. The same report shows 92% profitability, the UK's highest. Landlords sell for reasons disconnected from regional market performance: retirement and estate planning, portfolio restructuring, pre-Budget capital gains tax crystallisation before October 28, compliance fatigue from the Renters' Rights Act introduced in May 2026, and personal financial needs. In a profitable region, a seller's motivation is typically personal rather than market-driven. That creates a specific opportunity for buyers: properties with genuine income streams being sold by motivated sellers at prices reflecting the seller's personal situation, not the market's underlying fundamentals. Identifying that cohort through letting agents managing East Midlands portfolios, or through landlord-to-landlord sourcing networks, is the most effective route to those deals.
How does the East Midlands compare to the North East for buy-to-let investment in 2026?
The North East records higher peak postcode yields: Sunderland SR1 to SR4 and Middlesbrough TS1 to TS5 can produce 9% to 11% gross yields on two-bed terraced stock at £65,000 to £90,000. The East Midlands yields 7.3% on average against the North East's 6.6% Foundation regional average, because Nottingham's high-yield postcodes raise the East Midlands regional figure substantially. The profitability comparison favours the East Midlands at 92% versus approximately 85% to 87% for the North East. Entry prices in the East Midlands are higher in absolute terms than the North East, but the property types are more varied (terraced houses, city-centre flats, suburban family lets) and the tenant demographics are more diversified across NHS staff, university employees, professional households, and working-age renters rather than concentrated on post-industrial town household demand.
