The average value of rent arrears has fallen year-on-year for the first time since 2021, suggesting a modest improvement in affordability pressures within the private rented sector.
New data from deposit alternative provider Reposit shows the value of arrears dropped 12% in Q2 2025 to £1,861 compared to the same period last year. This also represents a sharp 20% decline from Q1, when arrears stood at £2,237.
The shift comes as rental growth begins to ease from its recent highs. Although rents continue to rise, figures from the Office for National Statistics show the rate of increase is slowing. In the 12 months to May 2025, average monthly private rents rose by 7.0% to £1,339, down from 7.4% in April and well below the 9% annual inflation recorded at the end of 2024.
A similar trend is evident in the buy-to-let mortgage market. UK Finance data for Q2 shows the number of buy-to-let mortgages in arrears fell by 5% to 11,270. Within that, cases in the lightest arrears band fell by 6% to 4,100. Arrears across both the homeowner and landlord mortgage markets remain low in relative terms, at 1% and 0.58% of all loans respectively.
Ben Grech, chief executive of Reposit, said the figures pointed to a tentative easing of financial pressures on landlords and tenants alike. “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,” he said.
However, he warned that the traditional deposit system is no longer fit for purpose. “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,” he added.
Reposit, which offers an insurance-backed deposit alternative, said it continues to see strong interest from landlords and agents seeking more comprehensive protection ahead of incoming reforms.
The government’s Renters’ Rights Bill is set to overhaul possession rules in England, including the abolition of Section 21 ‘no-fault’ evictions. Under the revised framework, landlords will need tenants to be at least three months in arrears – or 13 weeks for weekly or fortnightly payers – before seeking possession through Section 8 grounds. This is an increase from the current thresholds of two months and eight weeks respectively.
Grech warned that the new legislation will significantly alter how landlords deal with rent arrears and possession. “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.”
While the average arrears amount fell, the proportion of tenancies ending with outstanding rent dropped only slightly – by around 1% – from the previous quarter, suggesting that while the sums owed are lower, the incidence of arrears remains persistent.
