The value of rent arrears has fallen for the first time in four years and reflecting signs of easing pressure in the private rental market.
According to figures from deposit alternative provider Reposit, average arrears dropped by 12% year-on-year in the second quarter of 2025 to £1,861, the first decline for a second quarter since 2021. This also represented a 20% fall from Q1 2025, when arrears stood at £2,237.
The improvement coincides with a slowdown in rent inflation. Office for National Statistics data shows that while average UK monthly private rents rose 7% to £1,339 in the 12 months to May 2025, annual growth has eased from 7.4% in April and remains well below the near-9% increases recorded at the end of 2024.
In the buy-to-let sector, arrears also moderated. UK Finance data for Q2 shows that the number of landlords in arrears fell 5% to 11,270, with 4,100 in the lightest arrears band, down 6% on the previous quarter. Arrears remain low relative to the total mortgage market, accounting for 1% of homeowner loans and 0.58% of buy-to-let mortgages.
UNDER STRAIN
Despite the decline, landlords and tenants remain under strain from elevated borrowing costs and high living expenses.
Interest rates stand at 4% and inflation at 3.8%, squeezing household finances and limiting landlords’ ability to absorb higher costs.
Further disruption is expected with the passage of the Renters’ Rights Bill, which will abolish Section 21 “no-fault” evictions.
Under the reforms, landlords will be unable to use Section 8 repossession grounds until tenants are at least three months in arrears, up from two months currently.
SLOWING RENTAL COSTS
Ben Grech (main picture), Chief Executive of Reposit, says: “The drop in the value of rent arrears is a welcome sign that some financial pressures on landlords and tenants may be easing very slightly, likely driven by the recent slowdown in rental costs.
“However, the average cash deposit now stands at £1,316 which is £545 less than the average arrears value and underscores the inadequacy of traditional deposit schemes which offer just five weeks of protection.”
UNPREDICTABLE LANDSCAPE
And he adds: “Amid high interest rates, ongoing inflation, and significant legislative changes on the horizon, landlords are navigating an increasingly unpredictable landscape.
“The Renters’ Rights Bill could fundamentally reshape how arrears are managed and how repossessions are handled. We’re seeing a clear shift toward Reposit as landlords seek added protection and letting agents look to reduce compliance risks ahead of the reforms.”
