Landlords across the UK are being left increasingly vulnerable to financial losses as tenant arrears reach unprecedented levels, new data has revealed. The rising shortfall between cash deposits and outstanding rent is creating mounting concerns.
Arrears climb as landlords face higher risks
The latest figures from deposit alternative supplier Reposit show that the average arrears amount climbed to £2,597 in Q4 2024, marking a 44% increase from £1,802 the previous year. This substantial rise has left landlords exposed to potential shortfalls of up to £1,369 per tenancy, the highest recorded by the company.
While the overall percentage of tenancies ending with outstanding rent has slightly decreased in line with seasonal trends, the financial impact on landlords remains severe. Reposit’s data also highlights that the average cash deposit currently stands at just £1,228, leaving a significant gap between tenant liabilities and the financial protection available to landlords.
Ben Grech, CEO of Reposit, expressed concerns over the implications of these figures: “With average arrears now surpassing £2,500, the shortcomings of cash deposit schemes have become increasingly evident. This is concerning for landlords, especially with the upcoming Renters’ Rights Bill, which will abolish Section 21 evictions and eliminate a key layer of protection.”
Policy changes add to landlord uncertainty
The Renters’ Rights Bill is set to introduce major changes, including a new threshold for eviction under Section 8. Under the proposed legislation, landlords will only be able to initiate eviction proceedings if a tenant is at least three months in arrears, up from the current two-month threshold. For those paying weekly or fortnightly, this period will extend to 13 weeks, an increase from eight weeks.
Grech warned that these changes could further undermine landlords’ confidence in the rental market. “Once enacted, the Bill will make it even harder for landlords to reclaim their properties. Combined with increasing arrears and financial losses, this could push more landlords to exit the market,” he said.
Adding to financial pressures, UK Finance data shows that in Q4 2024, there were 12,610 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance, a 3% drop from the previous quarter. However, with interest rates remaining high—staying at 5% in October before a slight reduction to 4.75% in November—many landlords are struggling to balance their mortgage commitments.
New solutions needed to protect rental investments
As landlords navigate these financial risks, alternative solutions like deposit replacement schemes are gaining traction. Reposit’s insurance-backed product structure guarantees payment to landlords in the event of a tenant defaulting on charges normally covered by a cash deposit.
Grech noted an increasing shift in tenant preferences, with many opting for deposit alternatives. “As interest rates rise and tenancy periods extend, more tenants are reassessing the true cost of traditional cash deposits. Many now prefer to invest their money elsewhere rather than tying it up in a rental deposit,” he said.
Reposit’s offering allows tenants to pay a non-refundable fee equivalent to one week’s rent instead of the traditional five-week deposit. This model provides landlords with up to eight weeks of coverage, significantly mitigating their financial exposure.
Additionally, Reposit’s data indicates that the average charge for damage and cleaning (excluding arrears) reached £1,409 in Q4 2024. With the Renters’ Rights Bill requiring landlords to consider tenant requests to keep pets, concerns about property damage and repair costs are mounting. The need for stronger financial protection is becoming increasingly urgent as the private rental sector continues to evolve.
