Rent arrears hit a record low: What Q2's landlord trends data shows

The second quarter of 2026 produced some of the most encouraging data the buy-to-let sector has seen in several years. Research from the Landlord Trends report, conducted by Pegasus Insight on behalf of Paragon Bank and published in August 2026, found that rent arrears, landlord profitability, and average rental yields are all moving in a positive direction simultaneously.

Arrears at the lowest level on record

The proportion of landlords who reported experiencing rent arrears in the previous twelve months fell to 26% in the second quarter of 2026. That is a four-percentage-point decline from 30% in the first quarter and the lowest figure the Landlord Trends report has recorded since it began. The improvement continues a trend that has persisted across most of the past six years: at its peak in 2020, 42% of landlords reported arrears in the preceding twelve months. The direction of travel since then has been consistently downward.

Separate tenant research carried out by Pegasus Insight, based on interviews with three thousand private renters, provides useful context. Twelve per cent of tenants said they had missed a rental payment in the past year. Around nine in ten described their rent as either manageable or comfortable. The arrears picture reflects a rental market in which the large majority of tenancies are functioning as intended, with payments being made consistently.

There is, however, a meaningful difference by portfolio size. Among landlords with eleven or more properties, 66% reported experiencing arrears in the past year. Among those with between one and ten properties, the figure was 18%. The distinction reflects both the larger volume of tenancies that portfolio landlords manage and the statistical likelihood of encountering a payment difficulty somewhere across a larger holding.

Profitability and yields both improving

Alongside the arrears improvement, 86% of landlords reported that their lettings activity was profitable in the second quarter, up two percentage points on the first quarter. The research shows a sector in which the overwhelming majority of landlords are generating returns from their portfolios rather than operating at a loss, despite the higher cost environment of recent years.

Average gross rental yields reached 7.02% in the second quarter of 2026, according to Paragon Bank's lending data. That figure reflects the aggregate of rental income against property values across the buy-to-let sector and represents a yield level that is commercially meaningful for well-managed portfolios. Gross yield does not account for financing costs, management fees, maintenance, or voids, but as a top-line indicator of rental income performance it is at a level that supports the investment case for residential property.

The mortgage arrears picture from UK Finance

The Landlord Trends findings are consistent with industry-level data from UK Finance. In the second quarter of 2026, buy-to-let mortgages in arrears of more than three months represented 0.52% of outstanding mortgages, down from 0.68% a year earlier. Three-month-plus arrears in the buy-to-let sector have declined for nine consecutive quarters. UK Finance's data also shows that the credit performance of the buy-to-let sector has outperformed the owner-occupier mortgage market in 25 of the past 26 years.

What the data means for landlords

The Q2 figures provide a counterpoint to the narrative of landlord difficulty that has been prominent since the Renters' Rights Act came into force in May 2026. They do not suggest the pressures have disappeared. Void periods continue to affect four in ten landlords, and operating and regulatory costs remain elevated. But the core metrics of a functioning rental market, payment performance, profitability, and yield, are all pointing in the right direction at the midpoint of 2026.

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