Landlord rent arrears fell to a record low in the second quarter of 2026, while 86% of landlords said their lettings activity remained profitable, according to new Paragon Bank research. The figures point to a more resilient operating picture than much of the sector’s public debate would suggest.
Paragon’s latest Landlord Trends findings showed 26% of landlords had experienced rent arrears during the previous 12 months, down from 30% in the first quarter. At the same time, average gross rental yields were reported at 7.02%.
The stronger signal here is that income performance still appears to be holding up even as regulation, finance costs and tax pressure continue to dominate the wider policy conversation.
UK Finance data also showed fewer buy-to-let arrears
The Paragon findings were backed by wider lending data. UK Finance said there were 8,390 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter, 6% fewer than in the previous quarter. That left arrears at 0.44% of outstanding buy-to-let mortgages.
Lisa Steele, mortgage lending director at Paragon Bank, said: “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.”
She added that when landlords look at the performance of their own portfolios, the picture is generally more positive than the wider narrative suggests.
This follows Residential Landlord’s July coverage of UK Finance buy-to-let lending, which showed remortgaging activity was still doing much of the heavy lifting in landlord borrowing. The latest arrears figures suggest that many of those borrowers are still servicing debt without acute stress.
Profitability remains high despite policy pressure
The result is notable because it arrives in a year when landlords have faced continued adjustment to the Renters’ Rights Act, ongoing licensing expansion in many councils and a higher-rate environment than the sector enjoyed before 2022.
Against that background, an 86% profitability reading does not mean every landlord is comfortable. It does suggest, however, that the core private rented sector remains more stable than some of the more dramatic claims around mass distress imply.
Residential Landlord has also reported on rental growth strengthening this summer, which helps explain why income metrics have stayed firm even where borrowing costs remain elevated.
The numbers were reported as part of Paragon’s landlord trends research and referenced alongside UK Finance arrears data in new sector reporting on the Q2 position.
Implications for investors and lenders
For investors, the report will reinforce the case for disciplined stock selection and rent setting rather than a rush for expansion. For lenders, it is another sign that buy-to-let credit quality remains comparatively solid, which should help keep competition alive across refinance and specialist product ranges.
That does not remove the risks around court delays, tax drag or local compliance costs. But it does mean the basic cashflow picture looks stronger than many headlines imply.
Opinion
There is a difference between a pressured sector and a collapsing one. If arrears are at record lows and most landlords are still profitable, policymakers should be careful not to build future regulation around the assumption that private renting is already broken.
