Landlords are being left more exposed than ever to accumulating debt in the event of arrears after the average amount significantly jumped to £2,597 in Q4 24 – a dramatic rise of 44% from £1,802 in 12 months.

Deposit alternative supplier Reposit found the average cash deposit is currently £1,228 which is leaving landlords with a potential shortfall of £1,369. 

Although the amount charged in arrears cases has seen a sharp year-on-year rise as well as a quarterly increase of 26%, the overall percentage of tenancies ending with outstanding rent has dropped marginally in line with seasonal expectations. 

Throughout Q4 24, the pressures of high interest rates continued to weigh heavily on landlords’ shoulders with the rate staying at 5% in October and only falling marginally by 0.25% to 4.75% in November. This quarter also coincided with Chancellor Rachel Reeves’ Budget on October 30. 

Figures from UK Finance revealed there were 12,610 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the quarter, 3% fewer than in Q3 24.

Rents reduced slightly throughout Q4 24 to an average of £1,081, according to Reposit’s data, while broad figures from UK Parliament showed the cost of living crisis was still ongoing for many in the UK, with 53% of adults reporting an increase in their living costs in October 2024,  compared with the previous month. Unemployment also increased with the number of payrolled employees estimated to have fallen by 47,000 during the 12 months to December to 30.3m.

Ben Grech, chief executive of Reposit says: “With average arrears now surpassing £2,500, the shortcomings of cash deposit schemes have become increasingly evident. This is concerning for landlords, especially with the upcoming Renters’ Rights Bill, which will abolish Section 21 evictions and eliminate a key layer of protection. Once enacted, the Bill will stipulate that tenants must be at least three months in arrears (currently two months) or 13 weeks for tenants paying weekly or fortnightly (currently eight weeks) before a landlord can effectively use a Section 8 notice to evict.

“Our data separately shows that the average charge, including those for damage and cleaning (excluding arrears), reached £1,409 in Q4 2024. With the Bill requiring landlords to consider tenants’ requests to keep pets, the prospect of significant damage costs adds to their concerns. These future changes have sparked a surge in interest for our FCA-regulated product, which offers eight weeks of comprehensive coverage.

“As interest rates rise and tenancy periods extend, more tenants are reassessing the true cost of traditional cash deposits. Many are now eager to invest their money into savings, rather than having it tied up.”