Landlords are now facing greater financial risk due to the rise in rental arrears, with the average amount of outstanding rent increasing by 44% to £2,597 in Q4 2024, compared to £1,802 a year ago.

According to a deposit alternative provider, the current average cash deposit stands at £1,228 resulting in a potential loss of £1,369 for landlords.

Despite a substantial year-on-year increase in the amount charged in arrears cases as well as a 26% rise on a quarterly basis, the proportion of tenancies ending with unpaid rent has experienced a slight decline which is consistent with seasonal trends.

During the fourth quarter of 2024, landlords continued to face significant challenges due to high interest rates. In October, the rate remained steady at 5%, and only experienced a slight decrease to 4.75% in November. This period also included the Chancellor’s damning budget on October 30th.

According to a financial services company's report, there were 12,610 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in Q4 2024, marking a 3% decrease from the previous quarter.

Rent prices saw a slight decline during the same period, averaging £1,081, meanwhile, figures from the UK Parliament indicated that the cost-of-living crisis persisted for many, 53% of adults reported higher living expenses in October 2024 compared to the previous month.

Moreover, unemployment increased, with an estimated drop of 47,000 payrolled employees over the 12 months leading up to December, bringing the total to 30.3 million.

A spokesperson for the alternative deposit service, 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.