Buy-to-let sector shows strong profits and low arrears in 2026
New data from Paragon Bank reveals that rent arrears among landlords have dropped to a record low, while profitability and rental yields remain robust despite economic and regulatory challenges.
Research from Paragon Bank covering the second quarter of 2026 shows that only 26% of landlords experienced rent arrears over the past year, down from 30% in the previous quarter. Concurrently, 86% of landlords reported making a profit from their lettings, an increase of two percentage points. Average gross rental yields stood at 7.02%, indicating continued financial viability in the buy-to-let sector.
These findings suggest that rental income remains a reliable source of revenue for most landlords, even as the wider economic environment and regulatory landscape present ongoing pressures.
Paragon Bank’s landlord trends data and sector performance
Paragon Bank’s Landlord Trends report highlights a consistent outperformance of buy-to-let credit profiles compared to owner-occupiers. Over the past 26 years, buy-to-let landlords have experienced lower rates of three months plus arrears in all but one year. This long-term trend underscores the resilience of the sector in maintaining rental income streams.
The latest data shows a notable decline in the proportion of landlords reporting rent arrears, reaching the lowest level recorded by the bank. Alongside this, the majority of landlords are operating profitable businesses, with rental yields remaining healthy at just over 7% gross. These indicators collectively point to a sector where rental income is dependable and landlords are managing to sustain profitability despite external challenges.
Lisa Steele, Mortgage Lending Director at Paragon Bank, commented on the findings, noting the pressures landlords face from economic uncertainty, regulatory changes, and maintenance costs. However, she emphasised that most tenancies continue to function well, providing reliable income for landlords. Steele highlighted that landlord confidence tends to be stronger when focused on the performance of their own portfolios rather than broader economic conditions or future capital values.
Context of economic and regulatory pressures on landlords
Landlords in the UK have been navigating a complex environment marked by regulatory reforms, including the Renters’ Rights Act and evolving safety and licensing requirements. These changes have increased compliance obligations and operational costs. Additionally, economic factors such as inflation, interest rate fluctuations, and housing market uncertainty have influenced landlord decision-making and tenant affordability.
Despite these headwinds, the data suggests that the buy-to-let sector continues to deliver positive outcomes for the majority of landlords. The reduction in rent arrears may reflect improving tenant payment behaviours or effective management practices. Meanwhile, stable rental yields indicate that rental prices are keeping pace with costs, allowing landlords to maintain profitability.
However, the broader economic outlook remains cautious, and landlords are advised to remain vigilant regarding potential shifts in tenant demand and regulatory frameworks that could impact returns.
Practical implications for landlords and letting agents
For landlords managing small to medium portfolios, the data offers reassurance that rental income streams are generally secure, but it also highlights the importance of ongoing portfolio management. Maintaining up-to-date records of rent payments, tenant communications, and compliance with safety and licensing regulations is essential to sustaining profitability and reducing arrears risks.
Letting agents can use this data to support landlord confidence and demonstrate the sector’s resilience when advising clients. Emphasising strong rental yields and low arrears can help attract new landlords and reassure existing ones. Agents should also continue to monitor regulatory developments closely, ensuring that landlords are aware of their obligations and prepared for any changes.
Given the cautious sentiment around the wider economy, landlords may wish to review their rent-setting strategies, tenant vetting processes, and contingency plans for potential economic downturns. Keeping abreast of market trends and tenant affordability will be key to maintaining occupancy and income stability.
Remaining uncertainties and what to watch
While the current data is positive, uncertainties remain around the long-term impact of regulatory reforms and economic conditions on the private rented sector. The full effects of recent legislation, such as the Renters’ Rights Act, on rent levels and landlord behaviour are still unfolding. Additionally, potential changes in government policy or tax treatment of buy-to-let investments could alter the sector’s dynamics.
Landlords should watch for updates from government departments and industry bodies regarding compliance requirements and enforcement trends. Economic indicators such as inflation rates, wage growth, and unemployment will also influence tenant affordability and rent arrears risk over time.
Continued monitoring of rental yield trends and arrears data will provide valuable insights into sector health and help landlords and agents adjust strategies accordingly. It remains important to check official guidance regularly to ensure compliance and effective risk management.
Considerations for landlords amid evolving sector conditions
- Review and maintain comprehensive records of rent payments and arrears to identify and address issues early.
- Ensure all properties meet current safety and licensing standards to avoid enforcement actions and tenant disputes.
- Stay informed about regulatory changes affecting tenancy agreements, deposit handling, and eviction procedures.
- Evaluate rent levels against local market conditions and tenant affordability to optimise occupancy and income.
- Engage with letting agents who provide up-to-date advice on compliance and market trends.
- Plan for potential economic volatility by maintaining financial buffers and contingency plans.
Supporting landlords with TLA membership and ORBIT BETA
Membership of The Landlord Association (TLA) offers landlords and letting agents access to practical compliance resources and up-to-date information relevant to managing rental properties effectively. TLA’s developing property management platform, ORBIT, currently available in BETA testing, is designed to help members organise property records, monitor rent payments, and maintain evidence of compliance with safety and regulatory obligations.
ORBIT’s features in testing include tools for recording inspections, repairs, and tenant communications, which are crucial for managing arrears risks and demonstrating adherence to legal requirements. TLA membership also provides access to expert guidance on navigating regulatory changes and maintaining profitability in a shifting market.
Landlords and agents interested in strengthening their compliance and portfolio management capabilities may find exploring TLA membership and ORBIT BETA access beneficial as part of their ongoing strategy.
Looking ahead, the buy-to-let sector’s resilience will depend on landlords’ ability to adapt to evolving regulations and economic conditions while maintaining strong tenant relationships and effective property management practices.
Sources: Letting Agent Today
TLA - The Landlord Association