Finance News

Tenants in Rent Arrears Highest Since Figures Began in 2008

to let signsThe number of tenants unable to pay their rent on time is risen by almost a quarter in just 3 months. The trend is hitting landlords hard, especially those that buy to let.
The massive increase in people behind with their rent is attributed to the sharp rises in rent compared to the higher cost of living which is leaving households out of pocket each month. Many households try to stay on top of their rent by borrowing money using payday loans or credit cards, but this is only a short term solution. The worrying news is that some analysts are predicting that the situation is very likely to get worse.
A report named the Tenant Arrears Tracker Study was first compiled in 2008, the amount of people in arrears with their rent is the highest since the study began. 104,000 households in England & Wales had severe rent arrears during April, May and June of this year.
The amount of people in more than 2 months of rent arrears has shot up by a staggering 24% compared to the same time last year.
Paul Jardine, director and receiver at Templeton LPA said ‘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.’
The increase in tenants in arrears has only seen a rise of evictions via court orders of 6 %, as landlords try to weather the storm and continue to pay their mortgages, but it is not clear how long many of these buy to let landlords will be able to continue this.
Paul Jardine said: ‘The rising level of severe tenant arrears has yet to filter through into buy-to-let arrears. In fact, buy-to-let mortgage arrears have been steadily falling since the Bank of England reduced interest rates in 2009.’
‘Landlords have been enjoying historically low mortgage payments, which has cushioned the blow of late rent payments, and many have met the lower mortgage costs with money set aside from slush funds, or rental guarantee schemes.’
‘While landlords’ mortgage arrears are unlikely to rocket up until interest rates are hiked, rising tenant arrears and an unsteady labour market will provide upwards pressure.’
Image credit: Andrew Warran