Average rental arrears reached a new record high during the first quarter of 2026 although the pace of growth has slowed significantly, latest data from deposit alternative provider Reposit reveals.
The figures show average arrears climbed to £2,281 during Q1, highlighting the continued financial pressure facing tenants amid elevated living costs, higher borrowing rates and wider affordability challenges across the private rented sector.
However, annual arrears growth slowed to just 2% year-on-year, suggesting conditions may be starting to stabilise after several years of sharp increases.
The latest increase marks a notable slowdown compared with previous years, when arrears surged by 27% between Q1 2023 and Q1 2024, followed by a further 23% rise between Q1 2024 and Q1 2025.
IMPROVING STABILITY
The findings mirror wider signs of improving stability within parts of the buy-to-let market. Separate figures from UK Finance show there were 9,520 buy-to-let mortgages in arrears of more than 2.5% of the outstanding balance at the end of Q4 2025, down by 910 compared with the previous quarter.
Despite the slowdown in arrears growth, both landlords and tenants continue to face ongoing financial pressures.
Interest rates remained elevated at 3.75% throughout the quarter, while inflation averaged around 3.2%, continuing to squeeze household budgets and increase operating costs across the rental sector.
The latest figures also come as landlords adapt to the post-Renters’ Rights Act landscape, with the abolition of Section 21 no-fault evictions prompting greater caution around tenant selection and risk management.
MORE CAUTIOUS
Ben Grech (main picture), Chief Executive Officer at Reposit, says: “We know that 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.
“With the Renters’ Rights Act now in place and the abolition of Section 21 no-fault evictions, landlords are understandably becoming more cautious, given the reduced flexibility in how they manage tenancies.”
Reposit also highlighted growing concerns around the adequacy of traditional tenancy deposits in covering rising arrears levels.
According to the company, the average traditional tenancy deposit currently stands at £1,308 – almost £1,000 below the average arrears figure recorded during Q1.
LANDLORD PROTECTION
Grech says: “The average traditional deposit stands at £1,308 which is £973 below the average arrears value, highlighting the limitations of traditional deposit schemes.
“In this environment, solutions that reduce risk, improve affordability and provide greater protection for landlords will play a key role in supporting a more balanced and resilient rental market.
“At the same time, they enable renters to retain access to their money and use it for immediate needs, such as moving costs, or to invest for a return, rather than locking the money away for several years.”
