The proportion of landlords experiencing rent arrears has fallen to a record low, with the majority of landlords continuing to report profitable lettings businesses, Paragon Bank has revealed.

The bank’s latest research found that in Q2 2026, 26% of landlords reported experiencing rent arrears during the past 12 months. This represents a drop from 30% in Q1, marking the lowest level recorded by the long-running Landlord Trends report, conducted by Pegasus Insight.

Alongside record low arrears, 86% of landlords said they made a profit from their lettings activity, up by two percentage points on the previous quarter.

Paragon’s latest rental yields analysis found average gross yields reached 7.02% during Q2.

Furthermore, industry lending data acts as further evidence of the sector’s resilience, with figures recently published by UK Finance showing that three months plus arrears on buy-to-let mortgages have fallen for nine consecutive quarters, representing 0.52% of outstanding mortgages at the end of Q2, down from 0.68% a year previously.

Paragon said that these indicators point towards a sector where rental income remains reliable and the majority of landlords continue to operate profitable businesses despite ongoing economic, political and regulatory pressures.

It added that 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.

Mortgage lending director at Paragon Bank, Lisa Steele, stated: "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.

"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."

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