This marks the first year-on-year decline for a second quarter since 2021, and also represents a 20% drop from Q1 2025, when arrears averaged £2,237.
This reduction may reflect a slowdown in rental price growth: while rents are still rising, the pace has eased. According to the latest ONS figures, average UK monthly private rents increased by 7.0% to £1,339 in the 12 months to May 2025, down from 7.4% in April and below the 9% annual increases recorded at the end of 2024.
In the BTL market, UK Finance figures for Q2 show BTL arrears dropped 5% to 11,270, with 4,100 of these in the lightest arrears band, a 6% fall from Q1. Overall, arrears remain low as a share of total mortgages at 1% for homeowners and 0.58% for BTL.
Landlords and tenants continue to face financial challenges due to high interest rates - now 4% and inflation at 3.8% - alongside the upcoming Renters’ Rights Bill. 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.
Ben Grech, CEO of Reposit said: “The drop in the value of rent arrears is a welcome sign that some financial pressures on landlords and tenants may be easing very slightly, likely driven by the recent slowdown in rental costs. However, the average cash deposit now stands at £1,316 which is £545 less than the average arrears value and underscores the inadequacy of traditional deposit schemes which offer just five weeks of protection."
“Amid high interest rates, ongoing inflation, and significant legislative changes on the horizon, landlords are navigating an increasingly unpredictable landscape. The Renters’ Rights Bill could fundamentally reshape how arrears are managed and how repossessions are handled."
