Rent Arrear Claims Surge 50% Amid UK Cost of Living Crisis

A sharp increase in rent arrears in the final quarter of 2023 has indicated the financial struggles of tenants amid the cost of living crisis in the UK. According to newly released data from Reposit, an FCA-regulated deposit alternative firm, rental arrears claims have climbed by 50% in the year to December, highlighting how much the tenants are financially stretched, Property Wire reported. Earlier reports indicated that rising rents and regulations are compounding problems for tenants.  

Statistics Show Dramatic Rise In Rent Arrear Claims

According to Reposit’s data, rent arrear claims escalated from £1,344 ($1,700) in October to £2,108 ($2,666) in November, and they continued to remain high at £1,954 ($2,472) in December. Rent arrears refer to the unpaid rent that renters fail to pay on the stipulated date.

Furthermore, in the same period, the proportion of tenancies ending in arrears also increased from 13.7% in September and October to 15.8% in November and December.

The 50% jump in rent arrears was in stark contrast to a 4% rise in rental prices over the same time frame. This indicates that the renters are facing pressure from economic challenges and the debilitating cost of living crisis. The rising rent arrears coincide with rising defaults on mortgages and credit card payments.

Another trend analysis from Rightmove showed a remarkable change in rent affordability, with a reported 23% of rental properties slashing advertised rents, pointing to the financial distress tenants are experiencing.

The CEO of Reposit, Ben Grech, said on the issue, “The increase in rent arrears is obviously reflective of tough times for tenants, but this naturally has a knock-on effect for landlords, who are facing their challenges with Renters Reform and higher mortgage rates.”

Grech also noted that the additional pressures that add to the situation include increased administrative tasks, disputes, and delays in settlement due to rising arrears.

A Continuing Trend

Last year, the number of buy-to-let mortgages in arrears had doubled, according to a Guardian report. This was at a time when 14 consecutive interest rate increases, topped the broader cost of living pressures on several households, and landlords.

In November last year, the banking trade body UK Finance stated that there were 11,540 buy-to-let mortgages in arrears in the period between July to September, which marked a 29% increase from the previous quarter, and a 100% up from 2022.

Meanwhile, in the quarter ending September 2023, about 87,930 homeowner mortgages were in arrears, 7% higher than the figure for the previous three months, and up 18% on an annual basis.

Rising Rent Prices Compound The Issue

Last year, Bloomberg reported that rents are set to rise 25% over the next four years as landlords are set to pass on the extra costs from pricier mortgages and tougher regulation. The report citing data from the broker, Hamptons International, indicated that Britain’s tenants are feeling much more pressure from soaring interest rates than the rest of the housing market.

Most recently, the Office for National Statistics (ONS) also recorded a steep rise in rent prices. According to a Big Issue report, the ONS recorded a 6.2% rise in rents paid by tenants across the UK in the year up to January 2024.