The average rent arrears claim climbed to £2,064 in Q3 24 – a rise of 22% from £1,694 in Q3 23, data from deposit alternative provider Reposit has revealed.
This amount is now far higher than a traditional five week cash deposit which averages £1,347 – and highlights how landlords are currently left exposed to a shortfall of around £700 in the event of arrears.
Although the amount claimed in cases of arrears has seen a sharp YoY rise, the overall percentage of tenancies ending with outstanding rent has dropped in line with seasonal expectations. Between quarters, the arrears value in Q3 fell very slightly compared with the three months prior.
Throughout Q3 24, both tenants and landlords continued to experience high interest rates and increasing rents. Throughout July and August, the interest rate remained high at 5.25% and only fell marginally by 0.25% to 5% in September, while rents continued to rise by 3% throughout the period to an average of £1,149, according to Reposit’s data.
The effects of the headwinds faced by landlords were evident in the latest UK Finance stats which showed there were 13,000 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the third quarter of 2024, 4% fewer than in the previous quarter but up from 11,540 YoY.
Tenants have also continued to be affected by a lack of rental stock with available properties to rent now at their lowest in 15 years, falling to 259,000 in September 2024 for the whole of the UK, compared with 332,000 in September 2019 — a reduction of more than 22% (TwentyEA). Meanwhile, more broader figures from Statista suggest the cost of living crisis is still ongoing for many in the UK, with 52% of all households reporting their costs increased in August 2024.
Ben Grech, CEO of Reposit said: “The amount claimed for each arrears case is now exceeding £2,000, substantially outstripping the value of a five week cash deposit and leaving landlords at risk from an excess cost of around £700 per claim.
“With the incoming Renters’ Rights Bill, landlords are becoming increasingly conscious about protecting themselves in cases of rent arrears, driving more interest towards deposit alternatives. They are finding our FCA-regulated product – which provides an extra three weeks cover of eight weeks rent – reassuring against the current backdrop of affordability challenges for tenants, many of whom struggle to save the large lump sum required for a cash deposit.
“The number of tenancies ending in arrears of more than five weeks rent is now 17%, meaning the cost of living crisis has highlighted that landlords need more extensive cover in the event of arrears, while tenants need a more efficient option to relieve the squeeze on their cash flow.”
Tenants who choose Reposit pay one week’s rent as a non-refundable fee instead of having to find five weeks’ rent at the start of their tenancy. All tenants are eligible to use Reposit provided they pass referencing or provide a UK guarantor.
Reposit’s insurance-backed product structure means that landlords are guaranteed payment in the event of a tenant defaulting on any charges normally covered by a cash deposit. The tenant remains liable for any damage at the end of the tenancy, with any disputes resolved through an independent resolution service within 14 days.
