Rent arrears increase for many UK landlords

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A recent report by receivers Templeton LPA shows that landlords in the UK buy to let market have seen a sharp rise in the amount of tenants unable to pay their rent. The report shows that the number of tenants in arrears has now increased by 25%. In the three months to June, 100,400 tenants in England and Wales are in severe arrears. Those in the most severe difficulty rose by 8% with more than 7,000 tenants now two or more months in arrears compared to the first quarter of 2012.

Along with this increase there has also been an upsurge in the amount of tenants being evicted by court orders.  In the first three months of 2012 some 26,060 tenants were faced with eviction notices an increase of 5% on the same quarter in 2011.

The increase in severe tenant arrears cases and tenant evictions appears not to have had a knock-on effect on buy to let mortgage arrears. Indeed, the first three months of 2012 saw a fall of 4% in the number of buy to let mortgages more than three months in arrears, compared to the previous quarter. This represented an annual decline of 19%. Nonetheless, with the number currently standing at 23,700, this is nearly double the amount of buy to let mortgages in severe arrears than four years ago.

Paul Jardine, director and receiver at Templeton LPA commented: "As the private rented sector grows, the number of tenants in dire financial straits is steadily climbing. Falling wages in real terms have been compounded by rising rents, pushing a greater number of rented households over the edge financially. With the instability in the labour market and wider economy, and public sector cuts still to come, the section of renters in multiple months of arrears is likely to continue its expansion."

Despite the current increase in the number of tenants in severe rent arrears (tenants whose arrears are more than two months), the overall level of tenant arrears across the entire UK market has improved, with 8.9 per cent of all rent in the private rented sector late or unpaid by the end of May, a decrease from 9.9 per cent at the end of April.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.