"Despite the significant challenges landlords have faced over recent years, from higher borrowing costs to shifting tax rules, the fundamentals of tenant demand and income generation remain robust"
- Bethan Cooke - Pegasus Insight
Buy-to-let profitability has rebounded, with average rental yields reaching levels not seen in 10 years, according to new research by mortgage market specialist Pegasus Insight.
The latest Landlord Trends report (Q2 2025) shows the average rental yield at 6.5%, matching the 10-year peak recorded in Q3 2024. Returns are strongest in the North West, North East, and East Midlands, all averaging above 7%, while yields in London remain lowest at 6.1%.
Profitability is also high: 87% of landlords report making a profit, with 21% describing this as a ‘large’ profit and 66% as a ‘small’ profit. Only 5% report any form of loss. These results highlight the resilience of buy-to-let economics despite ongoing regulatory and tax challenges.
The rebound comes as landlords face potential legislative changes. The Renters’ Rights Bill is expected to receive Royal Assent by the end of September, introducing measures such as the abolition of Section 21 ‘no-fault’ evictions, the shift to open-ended tenancies, annual rent increase limits, and new tenant rights regarding pets and advance rent. With only 14% of landlords fully aware of the Bill’s details, the uncertainty is likely to influence portfolio strategies in the coming months.
Bethan Cooke, director at Pegasus Insight, said, “Yields at a 10-year high are a clear signal of the enduring strength of the private rented sector. Despite the significant challenges landlords have faced over recent years, from higher borrowing costs to shifting tax rules, the fundamentals of tenant demand and income generation remain robust. The fact that almost nine in 10 landlords are still making a profit demonstrates the sector’s ability to weather economic and policy storms.
“At the same time, the policy landscape is far from settled. The Renters’ Rights Bill represents the most significant set of changes in a generation, and while intended to protect tenants, it is also adding to landlord uncertainty. Our data shows landlords remain committed, but for many the coming 12 months will be a crucial period to review portfolios, financing and business models in light of what’s ahead.”
