Boost for landlords as rental arrears hit record low

The proportion of landlords experiencing rent arrears has fallen to a record low as property investors report more profitable lettings businesses.

New research from Paragon Bank — covering the second quarter of 2026 — revealed that 26% of landlords reported experiencing rent arrears during the past 12 months.

This was down by four percentage points from 30% in the first quarter of the year to mark the lowest level recorded by the long-running Landlord Trends report, conducted by Pegasus Insight on behalf of Paragon Bank.

Alongside record-low arrears, 86% of landlords reported making a profit from their lettings activity, up by two percentage points on the previous quarter, while Paragon's latest rental yields analysis found average gross rental yields reached 7.02% during the second quarter of the year.

This follows data from UK Finance that showed the three months plus arrears figures on BTL mortgages have fallen for nine consecutive quarters, representing 0.52% of outstanding mortgages at the end of the second quarter, down from 0.68% a year previously.

The findings are reflected in landlord sentiment. While confidence remains relatively subdued overall, landlords reported greater confidence in the performance of their own lettings businesses and rental yields than in factors outside their control, such as the wider UK economy and future capital values.

Commenting on the findings, Lisa Steele, mortgage lending director at Paragon Bank (pictured above), said: “We often hear about the pressures facing landlords, whether that's economic uncertainty, regulatory change or the wider costs associated with running and maintaining properties.

“What's sometimes overlooked is that the overwhelming majority of tenancies work well and continue to provide reliable income for landlords.

“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.”

Landlords still face challenges though, particularly since the introduction of the Renters’ Rights Act in May.

Lisa added: “It's understandable that landlords remain cautious about factors such as the wider economy and future market conditions. However, when they look at the performance of their own portfolios, the picture is generally much more positive.

“Most tenants continue to meet their rental commitments, most landlords report operating profitable businesses and those are the factors that have the greatest influence on day-to-day confidence.”