Research shows rents up

The rental sector is facing significant challenges as average rent arrears claims have reached a record high, according to data analyzed by alternative deposit provider Reposit. Here are the key points:

  1. Record High Arrears Claims: Between January 2021 and March this year, the average arrears claim reached £1,816, marking a substantial 27% increase compared to the same period last year. This surge reflects the mounting pressure on both tenants and landlords in the rental sector.
  2. Deposit Inadequacy: With five-week cash deposits averaging £1,256, landlords are increasingly at risk of insufficient funds to cover potential losses from arrears claims. In 14% of cases, a five-week cash deposit is deemed inadequate against incurred costs. Deposit alternative products offer landlords up to eight weeks of cover, providing a buffer against financial risks.
  3. Slowing Rate of Increase: While the rate of increase in arrears claims slowed to 0.8% in the last quarter of 2023, down from 11% in the same period the previous year, the number of tenants ending their tenancy with unpaid rent continues to rise. This suggests ongoing financial strain on tenants and challenges in rental affordability.
  4. Impact of Rising Inflation: The slowdown in the rate of increase in arrears claims may be attributed to the impact of rising inflation, which peaked at 11.1% in October 2022 but may be easing. However, the persistently high number of tenants leaving with arrears indicates ongoing financial difficulties.
  5. Wider Property Market Trends: The trend of rising arrears is not isolated to the rental sector but is mirrored across the wider property market. UK Finance reported 13,570 buy-to-let mortgages in arrears at the end of December. Additionally, average monthly rents rose by 10% to £1,108 in the first three months of this year compared to the same period last year.

Overall, the data underscores the financial challenges faced by tenants and landlords in the rental sector, highlighting the importance of effective financial planning and risk management strategies for both parties.

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