Average rental arrears climbed to a record £2,281 in the first quarter of the year, new figures from deposit alternative provider Reposit show, as tenants continued to struggle with high living costs.

With arrears increasing by just 2% year-on-year, however, the latest data suggests the pace of growth is beginning to slow following sharp rises in recent years.

Arrears surged 27% between the first quarter in 2023 and the first quarter in 2024. It is followed by a further 23% increase between the first three months in 2024 and the same period a year later.

At the same time, many landlords continue to face elevated finance costs, with interest rates at 3.75% and inflation averaging around 3.2%.

Mortgage arrears

Separate figures from UK Finance show 9,520 buy-to-let mortgages were in arrears of more than 2.5% of the outstanding balance during the last three months of 2025, although this was down by 910 on the previous quarter.

Ben Grech (pictured), Reposit‘s Chief Executive, 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.

Landlords are understandably becoming more cautious, given the reduced flexibility in how they manage tenancies.”

“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.”

Grech adds that traditional deposits may no longer offer sufficient protection against tenant arrears, and he points out that the average cash deposit is now £1,308, which is 74% below the average arrears of £2,281.