Average rent arrears climb as cost of living crisis bites

Average rent arrears claims climbed to £1,816 in the first quarter of this year.

That’s a rise of 27% from £1,435 in the same period last year, data from deposit alternative provider Reposit has revealed.

The company analysed its data from January 2021 through to the end of Q1 2024 and found this was the highest figure yet. It is also a sign of the unrelenting pressures within the rental sector on both tenants and consequently landlords. 

The statistics show arrears claims rose from an average of £1,507 in January this year, to £2,097 in February and hit £1,845 in March - an average of £1,816 for the quarter. While the amount for arrears claims grew, the rate that it is increasing has slowed. 

The rate grew 0.8% from Q4 2023 to Q1 2024 in stark contrast to last year. Across Q1 2023 to Q2 2023, it grew 11% following months of rising inflation which peaked in October 2022 at 11.1%, and remained high at around 8% in June 2023. 

This forced living costs up while the Bank of England’s base rate climbed 1.5% between Q1 2023 and the end of Q2 2023 from 3.5% to 5%, and pushed landlords’ mortgage repayments higher during this time. 

In addition, during the first three months of 2024 the percentage of tenants ending their tenancy with unpaid rent increased to 18%. This is up slightly from 15.3% in Q4 2023.

Meanwhile, across the wider industry, the Bank of England announced last month that mortgage arrears jumped by 9.2% in the final quarter of 2023 and by 50% on the previous year. 

The increase in rent arrears and the values involved come against a difficult backdrop of high mortgage rates for landlords which have driven rents upwards. 

Reposit’s data shows that across Q1 2024, the average monthly rent increased by 10% to reach £1,108 from £1,006 in the same period last year, although rents remained static compared with Q4 2023.   

Ben Grech, chief executive of Reposit, says the research shows how the first three months of the year had continued to reflect economic headwinds, leading to acute pressures on landlords and highlighting the importance of increased cover.

He comments: “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. 

“Our data shows that in 14% of cases a five week cash deposit is inadequate against the costs incurred but deposit alternative products offer landlords up to eight weeks cover and provide a choice for tenants with the opportunity to pay one week’s rent, as a non-refundable fee, instead of having to save a large lump sum.

“Arrears also have knock-on implications too for letting agents who have to devote substantial amounts of time to resolving the claims and carrying out all the admin tasks this creates.  

"We believe deposit alternatives are a more appropriate solution for the reality of tenancies in the UK and work more efficiently and fairly for each stakeholder in the rental process – landlords, agents and tenants alike which is especially helpful in the current economic climate.”