Rent Arrears Up 33%: Impact on UK Landlords

Almost one in five private tenants are struggling with their finances and are moving out of their homes, owing landlords more than five weeks' rent.

The claim comes from data released by alternative deposit firm Reposit.

The firm examined 1,000 tenancies ending since the start of the year and revealed that 17 per cent ended with landlords seeking rent arrears or compensation for property damage.

This marks a significant increase of around 33 per cent compared to last year, when only 13 per cent of tenancies ended in serious arrears.

However, so far in 2024, 49 per cent of tenancies have finished without any cost to the tenants.

Reposit CEO Ben Grech explained the figures highlighted how cash deposit schemes did not always provide landlords with the right level of protection because the law capped deposits at five weeks’ rent.

The tenant fees ban in 2019 limited deposits to five weeks’ rent for tenancies in England worth less than £50,000 a year.

Rents rise four times faster than inflation

Meanwhile, the latest rent data from the government’s Office for National Statistics (ONS) shows rents soared by 8.7 per cent in the year to May - slowing by a negligible 0.2 per cent from April’s year-on-year figure.

The peak average UK rent increase was 9.2 per cent annually, reached in March 2024.

Inflation hit the Bank of England's two per cent target for the first time in almost three years.

Renters pay an average of £1,301 monthly in England and £736 in Wales. Rents in England have risen by £103 a month since May 2023, while Welsh tenants are paying £58 a month more.

Regionally, rent rises in London are slowing but still growing the fastest in the country at 10.1 per cent yearly. Growth failed to reach the record 11.1 per cent increase registered in March.

Rents in the Northeast are moving up the slowest, increasing by 6.1 per cent, but this still represented a 0.3 per cent increase over the past month.

Renters in the London borough of Kensington and Chelsea pay the UK’s highest average rent at £3,397 a month. The lowest UK rent is £480 monthly in Dumfries and Galloway, Scotland.

Renting is still cheaper than buying

Paying rent is still cheaper than buying a home on a mortgage with a five per cent deposit, according to research by property consultants Hamptons.

The data revealed that buyers with a 5 per cent deposit in most towns and cities would pay £300 more monthly for a mortgage on their rented home than the average rent due to high interest rates.

However, the gap has narrowed since November, when the average tenant would have paid £547 extra a month to buy their rented home.

According to the Bank of England, the average mortgage rate for buying a home with a 5 per cent deposit is 6.1 per cent. Hamptons reckon the rate must fall to around 4.1 per cent to equalise mortgage costs with rents across the Midlands, North and Wales. The drop would need to hit 3.75 per cent in London and the South.