Landlord Knowledge - Home of the Savvy Buy to Let Property Investor

Rent Arrears Claims Surge by 27% as Tenants and Landlords Feel the Pinch

The latest data from deposit alternative provider, Reposit, indicates a significant rise in rent arrears, highlighting the increasing financial strain on tenants and landlords alike.

Reposit’s analysis of data from January 2021 to the end of Q1 2024 reveals that the average rent arrears claims have escalated to £1,816 in the first quarter of 2024, marking a 27% increase from £1,435 in the same period last year. This is the highest figure recorded yet, reflecting ongoing challenges within the rental sector. Monthly figures within the quarter saw arrears peaking at £2,097 in February before settling at £1,845 in March. The overall increase for the quarter stood at 0.8%, a slowdown from the 11% growth seen from Q1 to Q2 in 2023, a period significantly impacted by rising inflation and interest rates.

Mortgage and Rent Arrears on the Rise
The burden on tenants has translated to an increased financial load on landlords as well, with the percentage of tenancies ending with unpaid rent rising to 18% in early 2024 from 15.3% at the end of 2023. The sector-wide impact is evident with UK Mortgage reporting 13,570 buy-to-let (BTL) mortgages in significant arrears and a 56.3% increase in BTL mortgage possessions in Q4 2023. These challenges are compounded by the Bank of England’s recent announcement of a 9.2% increase in mortgage arrears in the last quarter of 2023.

Solutions and Adaptations in the Rental Market
During these financial challenges, Reposit CEO Ben Grech highlights the escalating need for adequate protection for landlords. He explains, “Five week cash deposits now average £1,256 and with arrears claims topping £1,800, more and more landlords are at risk of not having enough deposit to cover possible losses.” Reposit’s solution offers landlords up to eight weeks of cover through their insurance-backed product, providing tenants the option to pay a one-week rent fee instead of a traditional large deposit. Grech adds, “Arrears also have knock-on implications for letting agents who have to devote substantial amounts of time to resolving the claims and carrying out all the admin tasks this creates.”

This situation underscores the growing importance of alternative deposit products that can mitigate the risks for all parties involved in the rental process, offering a more practical approach in the current economic climate.