Despite stable profits for most landlords, confidence in the lettings market is waning amid concerns over new legislation and tenant demand. Research from Aldermore reveals that while profitability remains strong, expectations for the months ahead have softened significantly.

Profitability Remains Robust

Aldermore’s latest research shows that 84% of landlords report their lettings activity as profitable, with average achieved yields reaching 6.5% in the first quarter of 2026. This figure marks a slight increase from the previous quarter and ties as the joint second highest quarterly yield recorded over the past five years.

However, profitability is not uniform across the sector. Landlords without borrowing report higher profitability at 90%, compared to 77% among those with mortgages. Larger portfolio landlords also tend to report stronger profits than smaller, part-time investors, highlighting a divide between more professional landlords and those managing fewer properties.

Insights from Industry Experts

Jon Cooper, Aldermore’s director of mortgages, commented: “If you’re a landlord or a broker, there are reasons to be hopeful here. Five out of every six landlords (84%) report their lettings activity being profitable. The average achieved yield is 6.5%, up slightly since last quarter.”

He added, “Encouragingly, this is the joint second highest quarterly yield within the last five years. Generally speaking, we’re seeing that the more professional and sophisticated landlords are navigating the changing market with greater confidence, whereas part-time landlords with smaller portfolios can struggle to adapt.”

Tenant Demand Shows Signs of Decline

While tenant demand remains strong for a majority of landlords, the proportion describing it as such has fallen steadily. Currently, 58% of landlords report strong tenant demand, down from 61% in the final quarter of 2025 and 73% in the first quarter of last year. This decline has been consistent since Q1 2024, when 83% of landlords considered tenant demand strong.

More landlords now describe tenant demand as average, with a slight increase in those reporting weak demand. This trend reflects a cooling rental market, which may be influencing landlords’ overall confidence.

Confidence in Lettings Business Dips

Expectations for landlords’ lettings businesses have dropped to their lowest point since the second quarter of 2023. In the first quarter of 2026, only 27% of landlords felt positive about their lettings business, compared with mid-30% levels seen over the previous two years.

Concerns Over the Renters’ Rights Act and Court Capacity

The introduction of the Renters’ Rights Act (RRA) is a significant source of concern. Only 8% of landlords expect the legislation to positively impact their portfolios, while 16% anticipate no impact. A substantial 70% foresee a negative effect, and 5% remain unsure.

Additionally, court capacity is causing anxiety among landlords, with nine in ten expressing worry about potential backlogs in eviction proceedings. These issues compound the challenges landlords face in maintaining confidence despite steady profits.

What this means for landlords

Although profitability remains solid, landlords must navigate a market with declining tenant demand and increasing regulatory pressures. The divide between professional landlords and smaller operators suggests that those with larger, more sophisticated portfolios may be better positioned to adapt to these challenges.

Concerns about the Renters’ Rights Act and court delays highlight the importance of staying informed and prepared for legislative changes. Landlords may need to review their strategies to mitigate risks associated with these developments while maintaining profitability.

Source: Based on reporting from Property118

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