UK landlords are enjoying their most profitable spell since 2020, with 87% reporting a profit in Q2 2025 — just one point below a five-year high, according to new research for Paragon Bank. Strong rental yields and continued tenant demand are keeping the buy-to-let market attractive despite rising costs and tighter regulation.
Profitability boosted by high yields and rental demand
The study, conducted by Pegasus Insight for Paragon, shows an increase from 84% in Q1 to 87% in Q2. That’s a ten-point jump from the same quarter in 2023, when profitability slumped to a five-year low of 77%. Only 5% of landlords now report making a loss, down from 7% earlier this year, while 8% are breaking even.
Louisa Sedgwick, Managing Director of Mortgages at Paragon Bank, said: “It’s encouraging to see landlord profitability nearing a five-year high. This chimes with recent analysis of our own lending data which revealed that yields remained at almost their highest levels in over a decade.”
For landlords, these yields are being underpinned by resilient demand for quality rental homes, particularly in areas where limited supply and shifting mortgage rates continue to put home ownership out of reach for many tenants.
Tenant relationships matter for the bottom line
While the overall picture is positive, the data reveals a clear profitability gap for landlords dealing with problematic tenancies. Only 79% of landlords who had experienced rent arrears or property damage in the past year reported making a profit. The same figure applied to those who had to evict a tenant.
Sedgwick noted: “The data suggests there may be a link between profitability and harmonious relationships between responsible landlords and respectful tenants. It’s not always plain sailing, and these results show how issues like arrears or damage can have a tangible impact on the viability of a lettings business.”
On average, landlords spend more than 20% of their gross rental income on running and maintaining their properties—covering repairs, compliance, insurance, and management costs—before they see any return.
Resilience in a changing market
Despite looming challenges such as Making Tax Digital, EPC upgrade requirements, and the Renters’ Rights Bill, Paragon’s figures suggest many landlords are weathering the storm better than expected. For portfolio landlords in particular, rising rents have offset increases in mortgage and maintenance costs.
Some in the sector are now weighing expansion while yields remain high. Others, mindful of the legislative headwinds, are focusing on tenant retention and property quality to protect margins.
Editor’s view
Profitability at this level shows the PRS is still a robust investment space for those who manage costs, maintain good tenant relationships, and adapt to policy shifts. The next question is whether this resilience will hold once upcoming tax and regulatory changes bite—or whether today’s near-peak profits will mark the high-water line before the sector faces its next squeeze.
