Landlords are facing increasing financial strain as average rent arrears have surged to £2,597, marking a 44% increase within a year, according to recent research. This sharp rise highlights the growing risk of unpaid rent and the challenges landlords must navigate in the current economic climate.
A report by Reposit, a deposit alternative provider, reveals that with the typical cash deposit standing at £1,228, there is now a potential arrears shortfall of £1,369—the highest figure recorded to date. This gap underscores the financial vulnerability landlords face when tenants fall behind on payments.
Despite the rise in arrears, the proportion of tenancies with outstanding rent balances has seen a slight decline. However, landlords continue to struggle with the burden of high interest rates, which stood at 5% in October before decreasing slightly to 4.75% in November. The financial pressure from rising costs and unpredictable rental payments adds further uncertainty to the sector.
Additionally, the latest quarter reflects the impact of Chancellor Rachel Reeves’ Budget in October, which introduced policies that may further shape the rental market. With economic conditions fluctuating, landlords must adapt to ongoing financial challenges while balancing affordability for tenants.
‘Average arrears now surpassing £2,500’
Ben Grech, chief executive of Reposit, has highlighted growing concerns over rising rent arrears and the limitations of traditional cash deposit schemes. With average arrears now exceeding £2,500, landlords are increasingly exposed to financial risk, especially as rental policies continue to evolve.
A major point of concern is the upcoming Renters’ Rights Bill, which will abolish Section 21 evictions, removing a key protection for landlords. Once the Bill is enacted, eviction rules will also change. Tenants will need to be at least three months in arrears—up from the current two months—before landlords can issue a Section 8 notice. For those paying rent weekly or fortnightly, the required arrears period will extend from eight weeks to 13 weeks. These changes could make it even harder for landlords to reclaim properties in cases of persistent non-payment.
In addition to arrears, landlords must also account for other costs. Reposit’s data from Q4 2024 reveals that the average charge for damages and cleaning—excluding arrears—stood at £1,409. This adds to financial pressures, particularly with new regulations requiring landlords to consider tenant requests for pets. The potential for additional property damage further increases landlords’ concerns about the long-term viability of their investments.
Buy to let mortgages with arrears
Recent data from UK Finance reveals that there are currently 12,610 buy-to-let mortgages in arrears of 2.5% or more. While this marks a 3% decline from the previous quarter, financial pressures on landlords and tenants remain a significant concern.
According to Reposit’s latest findings, average rents saw a slight decrease to £1,081 in Q4 2024. However, this small dip does little to offset the broader economic challenges that continue to impact both landlords and renters.
Parliament figures highlight the ongoing cost of living crisis, with 53% of adults reporting higher expenses in October. Rising household costs and financial strain make it harder for tenants to keep up with rent payments, increasing the risk of arrears in the long term.
Additionally, job numbers have declined, with 47,000 fewer payroll employees recorded in the year leading to December. The total number of payroll employees now stands at 30.3 million, marking the biggest drop since November 2020. This downturn in employment further compounds the financial difficulties facing many households, creating further instability in the rental market.
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