Average rent arrears claims reached £2,092 in Q2 24 – a rise of 15% from £1,816 in Q1 24 and an increase of 31% from £1,594 compared with Q2 23 – Reposit data has revealed.
These figures are a reflection of the financial difficulties both tenants and landlords continue to face such as high interest rates and increasing rents. Throughout Q2, the interest rate remained high at 5.25%, while rents continued to rise by 2% throughout the period to an average of £1,133, according to Reposit data.
The effect of substantial market pressures on landlords was apparent in a report by the lenders’ trade body UK Finance which showed that at the end of Q2 24 there were 13,570 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance – 1% greater than in the previous quarter. However, 710 buy-to-let mortgaged properties were taken into possession in the second quarter of 2024, 13% higher than in Q1.
Reposit found that while the average amount claimed for tenant arrears had increased, the overall percentage of tenancies ending with outstanding rent dropped by around 3% compared to Q1.
Ben Grech, CEO of Reposit said that despite this figure reducing, landlords remained at significant risk of not receiving enough cover from a five week cash deposit in the event of arrears.
He said: “While we’re seeing the number of arrears cases reduce slightly, the amount claimed is now averaging over £2,000 – way above the value of a five week cash deposit of £1,293 – leaving landlords with an average shortfall of around £800.
“We know cash deposits are not enough in 17% of tenancies to cover costs such as rent arrears or damage and this stark inefficiency of the cash schemes is one reason demand has increased for our FCA-regulated product, with sales up by 28% in the first six months of this year compared to last. Deposit alternative products offer landlords up to eight weeks of cover and enhance tenant experience by providing them with a choice of paying one week’s rent as a non-refundable fee, instead of saving for a large lump sum. At the same time, letting agents benefit by spending significantly less time in lengthy communications with the cash schemes.
“These obvious and valuable benefits for landlords, agents and tenants alike highlight why we’re continuing to gain ground in the UK rental market.”
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.
