The proportion of landlords experiencing rent arrears has fallen to its lowest level on record, while 86% say their lettings businesses are profitable, new research from Paragon Bank has revealed.
Just over a quarter (26%) of landlords reported experiencing rent arrears during the previous 12 months in the second quarter of 2026.
That was down from 30% during the first quarter and the lowest figure recorded by the long-running Landlord Trends research, conducted by Pegasus Insight on behalf of Paragon.
The findings come despite continued economic and regulatory pressures on the private rented sector and coincide with average gross rental yields reaching 7.02% during the second quarter.
86% OF LANDLORDS MAKING A PROFIT
Paragon’s research found 86% of landlords reported making a profit from their lettings activity, two percentage points higher than during the previous quarter.
Separate industry figures also point towards improving credit performance among buy-to-let borrowers.
UK Finance data shows the proportion of buy-to-let mortgages at least three months in arrears has fallen for nine consecutive quarters.
They accounted for 0.52% of outstanding buy-to-let mortgages at the end of Q2, compared with 0.68% a year earlier.
Paragon said buy-to-let mortgage arrears have been lower than those among owner-occupiers in all but one of the past 26 years.
LANDLORDS MORE CONFIDENT ABOUT OWN BUSINESSES
The research also identifies a gap between landlords’ views of their own businesses and their confidence in the wider economy.
While overall sentiment remains relatively subdued, landlords are more confident about their own lettings businesses and rental yields than external factors such as the UK economy and future property values.
Lisa Steele (main picture), Mortgage Lending Director at Paragon Bank, says: “We often hear about the pressures facing landlords, whether that’s economic uncertainty, regulatory change or the wider costs associated with running and maintaining properties. What’s sometimes overlooked is that the overwhelming majority of tenancies work well and continue to provide reliable income for landlords.
“Record-low arrears, strong levels of profitability and healthy rental yields are all signs of a sector that continues to demonstrate resilience despite a challenging backdrop.”
POSITIVE PICTURE
Steele adds: “It’s understandable that landlords remain cautious about factors such as the wider economy and future market conditions. However, when they look at the performance of their own portfolios, the picture is generally much more positive.
“Most tenants continue to meet their rental commitments, most landlords report operating profitable businesses and those are the factors that have the greatest influence on day-to-day confidence.”
