Despite continued concerns about rising costs, tax changes and new regulations, the buy-to-let sector appears to be performing better than some recent headlines suggest.
New research from Paragon Bank shows that the number of landlords experiencing rent arrears has fallen to its lowest level since the bank began tracking the figure. At the same time, most landlords continue to report that their rental businesses are profitable.
Landlord Rent Arrears Fall
According to Paragon Bank’s latest Landlord Trends research, 26% of landlords said they had experienced rent arrears over the previous 12 months during the second quarter of 2026.
This represents a four percentage point fall from the 30% recorded during the first quarter. It also marks the lowest level of reported rent arrears in the history of the bank’s research.
The figures suggest that, despite the financial pressures affecting many households, most tenants are continuing to meet their rental commitments.
For landlords, this provides some reassurance at a time when concerns over affordability, regulation and operating costs remain high.
Majority of Landlords Remain Profitable
The research also found that 86% of landlords reported making a profit from their rental properties during the second quarter.
That figure increased by two percentage points compared with the previous quarter, further suggesting that many landlords are continuing to manage profitable portfolios despite the challenging market.
Rental yields also remain relatively strong. Paragon Bank’s latest analysis found that average gross rental yields reached 7.02% during the second quarter of 2026.
While gross yield does not account for mortgage costs, maintenance, tax or other expenses, the figure highlights the income potential that remains available to property investors.
Buy-to-Let Credit Performance Remains Strong
Paragon also points to the longer-term performance of the buy-to-let sector when compared with owner-occupied properties.
The bank says that buy-to-let mortgages have generally recorded lower levels of serious arrears than mortgages held by owner-occupiers. Over the past 26 years, three-month-plus arrears have been lower in the buy-to-let market in all but one year.
This suggests that landlords and tenants have continued to maintain relatively stable payment patterns, even during periods of economic uncertainty.
The latest figures therefore provide a different perspective on the challenges facing the private rented sector. While landlords are dealing with increased costs and regulatory changes, the underlying rental income from many portfolios remains reliable.
Landlords Still Concerned About the Wider Market
The positive figures do not mean landlords are completely confident about the future.
Paragon’s research shows that confidence remains relatively cautious, particularly when landlords consider factors outside their direct control.
Landlords appear more confident about the performance of their own rental businesses and the income generated by their properties than they are about the wider UK economy or future property values.
This difference is understandable given the number of changes currently affecting the property market.
Higher running costs, changing tax rules and new rental regulations are all creating additional considerations for landlords. At the same time, uncertainty over property prices can make it harder for investors to predict the future value of their portfolios.
However, the latest data suggests that these concerns have not prevented most landlords from maintaining profitable businesses.
A More Resilient Rental Sector
Lisa Steele, Mortgage Lending Director at Paragon Bank, said landlords often face significant attention over economic uncertainty, regulation and the cost of maintaining properties.
However, she highlighted that most tenancies continue to operate successfully and provide landlords with a dependable source of income.
The combination of falling arrears, strong profitability and healthy rental yields suggests that the buy-to-let market may be more resilient than some reports imply.
For landlords, the figures also highlight the importance of looking at the performance of their own portfolios rather than relying solely on wider market sentiment.
What This Means for Landlords
The latest Paragon figures do not remove the challenges facing the buy-to-let sector, but they provide some encouraging signs.
With rent arrears at a record low, 86% of landlords reporting profits and average gross yields above 7%, the sector continues to show signs of underlying strength.
Landlords are likely to remain cautious about future tax changes, regulations, interest rates and property values. However, the latest research suggests that, for many investors, rental income remains relatively dependable.
As the private rented sector continues to change, these figures could offer some reassurance that buy-to-let remains a viable investment for landlords who are able to manage their costs and adapt to the changing market.
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