Multi-occupancy homes (HMOs) continue to outperform the wider private rented sector market, achieving significantly higher average returns of 7.3%, Pegasus Insight reveals.
The latest data shows that the average interest rate for landlords fell to 6.4% in the final quarter of 2025, down from the average of 6.6% in the third quarter.
The survey also found that 85% of landlords still consider their rental activities profitable, even if this is 4% less than the previous quarter.
Landlords with a standard real estate portfolio, on the other hand, are more exposed because costs remain high.
Pegasus Insight director and founder Mark Long says: “The key takeaway from the fourth quarter is not that profitability has weakened significantly, but that it is becoming increasingly uneven. Overall returns remain close to recent highs, but the margin for error is narrowing for a growing proportion of hosts.”
“We are seeing a clearer separation between business models. Higher-yielding, more intensively managed portfolios, especially healthcare facilities, continue to offer a degree of insulation, while more traditional portfolios have less flexibility as costs and complexity remain a challenge.”
“The risk for rent-to-rent 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.”