Rental yields on standard or ‘vanilla’ buy to let properties are falling, according to the latest Mortgages for Business Complex Buy to Let Index.

Gross yields on vanilla buy to let properties now stand at 5.9% as of Q3 2014, down from 6.3% in the second quarter and 6.4% in Q1 2014. This leaves yields for standard buy to let landlords at the lowest level since the final quarter of 2013, when gross vanilla yields last stood at 5.9%.

David Whittaker, managing director at Mortgages for Business, comments:  “Rents on the plainest buy to let properties have not kept pace with rapid price rises in many areas, suppressing average yields. This illustrates two key points for landlords – location matters – and the simplest investments are not always the most lucrative.”

Other property types have much higher yields. Multi-unit freehold blocks (or MUFBs) now provide landlords with a gross yield of 8.6% in Q3 2014, up from 7.3% in the second quarter and the highest yield on record for this property type.

Houses in multiple occupation (HMOs) have seen rental yields dip to 8.9% in the third quarter, from 9.3% in Q2. This is considerably lower than the all-time record set one year ago for HMO yields, when these properties provided an average yield of 11.8% in Q3 2013. However, HMO properties still provide an extra 3% average yield compared to vanilla BTL.