Average rental arrears reached a record £2,281 in the first quarter of the year, according to new data from deposit alternative provider Reposit, as tenants continued to face elevated living costs.
The figures show arrears increased by 2% year-on-year, suggesting the pace of growth is slowing following sharp rises in recent years. Arrears had surged 27% between the first quarter of 2023 and the first quarter of 2024, followed by a further 23% increase between the first three months of 2024 and the same period in 2025.
Landlord pressures mount
Landlords continue to face elevated finance costs, with interest rates at 3.75% and inflation averaging around 3.2%. Separate figures from UK Finance show 9,520 buy-to-let mortgages were in arrears of more than 2.5% of the outstanding balance during the last three months of 2025, though this was down by 910 on the previous quarter.
The data comes as estate agency financial distress rises 19% year-on-year, reflecting broader pressures across the rental sector.
Ben Grech, Chief Executive of Reposit, said landlords are becoming increasingly risk-averse, placing greater emphasis on financial security and tenant reliability. “While there are early signs that arrears are beginning to stabilise, they remain slightly elevated, as both landlords and tenants continue to feel the impact of sustained cost pressures,” he said.
Deposit protection concerns
Grech noted that with the Renters’ Rights Act now in place and the abolition of Section 21 no-fault evictions, landlords are becoming more cautious given the reduced flexibility in how they manage tenancies.
Traditional deposits may no longer offer sufficient protection against tenant arrears, according to Reposit’s analysis. The average cash deposit now stands at £1,308, which is 74% below the average arrears of £2,281.
The findings highlight ongoing challenges in the rental market as both landlords and tenants navigate sustained cost pressures, with implications for broader housing market activity amid weakening buyer demand.
The stabilisation in arrears growth rates may offer some relief to landlords, though the absolute level of arrears remains significantly elevated compared to pre-pandemic levels.
