Buy-to-let sector shows resilience with record-low rent arrears
Research from Paragon Bank reveals rent arrears among landlords have fallen to a record low, with 86% reporting profits and average gross rental yields exceeding 7%, indicating strong sector health despite ongoing challenges.
Paragon Bank’s latest Landlord Trends report for the second quarter of 2026 shows that only 26% of landlords experienced rent arrears in the past year, down from 30% in the first quarter. This marks the lowest level of arrears recorded by the bank in over two decades of tracking landlord data.
Alongside this improvement, 86% of landlords reported making a profit from their lettings, a two percentage point increase from the previous quarter. The bank’s analysis also found that average gross rental yields stood at 7.02% during the same period, underscoring the sector’s continued ability to generate income.
Paragon Bank’s findings on buy-to-let credit performance
Paragon Bank emphasises that buy-to-let landlords have maintained a stronger credit profile than owner-occupiers, with arrears exceeding three months consistently lower in the buy-to-let sector in 25 of the past 26 years. This suggests rental income remains a reliable source of revenue for landlords even amid economic and regulatory pressures.
Lisa Steele, Mortgage Lending Director at Paragon Bank, highlighted the resilience of the sector, noting that despite economic uncertainty and regulatory changes, most tenancies function well and landlords continue to operate profitable businesses. She pointed out that landlord confidence tends to be higher regarding their own portfolio performance than broader economic factors.
Steele commented: “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.”
Context of ongoing economic and regulatory challenges
The private rented sector has faced numerous challenges in recent years, including changes to tenancy laws, increased safety and licensing requirements, and broader economic pressures such as inflation and cost of living rises. These factors have impacted landlord operating costs and tenant affordability, raising concerns about arrears and profitability.
However, the Paragon data suggests that landlords are adapting to these challenges. The reduction in rent arrears indicates that tenants are largely meeting their rental commitments, which may reflect improved affordability in some areas or more effective management and communication by landlords and letting agents.
While the sector has seen some regulatory reforms aimed at improving tenant protections, such as the Renters’ Rights Act and enhanced safety standards, these have not yet translated into widespread financial distress for landlords according to this report.
Practical implications for landlords and letting agents
For landlords managing small portfolios, the findings offer reassurance that rental income can remain stable and profitable despite external pressures. Maintaining good tenant relations and ensuring compliance with evolving regulations will be critical to sustaining this performance.
Letting agents should continue to support landlords in monitoring rent payments and addressing arrears promptly. The data also highlights the importance of understanding local market conditions to optimise rental yields and tenant retention.
Landlords may consider reviewing their rent setting strategies in light of the reported average yields, ensuring rents reflect current market demand without risking increased arrears. Additionally, staying informed about regulatory changes remains essential to avoid penalties and maintain property standards.
Uncertainties and areas to watch
Despite the positive indicators, some uncertainties remain. The broader economic outlook, including inflation trends and interest rate movements, could affect tenant affordability and landlord borrowing costs. The impact of future regulatory reforms, particularly those related to tenancy security and rent controls, also warrants close attention.
There is limited data on how smaller or more vulnerable landlords are faring compared to larger institutional investors, which may mask pockets of difficulty within the sector. Monitoring changes in tenant behaviour and demand, especially as new legislation takes effect, will be important for anticipating shifts in arrears and profitability.
Considerations for landlords going forward
- Regularly review tenancy agreements and rent levels to align with market conditions and regulatory requirements.
- Maintain thorough records of rent payments, communications, and compliance activities to support any future disputes or inspections.
- Stay updated on forthcoming changes to tenancy law and safety regulations to ensure ongoing compliance and minimise risk.
- Engage proactively with tenants to address affordability issues early and reduce the likelihood of arrears.
- Evaluate portfolio performance periodically to identify underperforming assets or opportunities for improvement.
Supporting landlords with compliance and portfolio management
The Landlord Association (TLA) offers members access to a range of practical compliance resources and document support designed to help landlords and letting agents manage their portfolios effectively. TLA’s new property management and compliance platform, ORBIT, currently in BETA testing, aims to assist users in organising property records, monitoring regulatory developments, and recording key actions such as repairs, inspections, and communications.
ORBIT’s developing features include tools to produce and retain essential tenancy documents and to keep property management information consolidated, which can be particularly valuable as landlords navigate evolving legal obligations. TLA membership provides ongoing access to these resources and helps landlords stay informed about changes affecting rent collection, possession procedures, and safety compliance.
Explore TLA membership and learn more about ORBIT BETA access to support your rental business in maintaining profitability and compliance.
Looking ahead, landlords should continue to monitor economic indicators and regulatory updates closely. While the current data points to a resilient sector, adaptability and proactive management will be key to sustaining success in a changing environment.
Sources: Landlord Today
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