The Pegasus Insight Landlord Trends Q4 2025 research found that 85% of landlords said their lettings activity was profitable, a 4% decline on the previous quarter.
The share of landlords reporting a financial loss rose by 2%, while average rental yields slipped from 6.6% in Q3 to 6.4% in Q4.
Pegasus Insight found disparities in performance across the rental market, with landlords operating HMOs outperforming the wider market and generating higher-than-average yields of 7.3%.
By contrast, landlords with standard property portfolios reported being more exposed to the costs of letting rentals.
Mark Long, managing director and founder of Pegasus Insight, said: “The key takeaway from Q4 is not that profitability has weakened significantly, but that it is becoming more uneven. Overall returns remain close to recent highs, but the margin for error is narrowing for a growing proportion of landlords.
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“We’re seeing a clearer separation between business models. Higher-yielding, more intensively managed portfolios, particularly HMOs, continue to provide a degree of insulation, while more traditional portfolios have less flexibility as costs and complexity remain challenging.”
He added: “The risk to buy-to-let landlords is not a sudden deterioration in performance, but a more gradual erosion of resilience.
“In an environment where yields are no longer rising, the ability to absorb further regulatory, operational or economic pressures will increasingly depend on the strength of landlords’ financial structures and the scale and mix of their property portfolios.”
