Rent arrears increase in last three months of 2013 though buy-to-let mortgage arrears fall

14th January 2014

Some 67,000 households now owe more than two months’ rent according to the latest Tenant Arrears Tracker. The proportion of severe arrears has risen 3.4% in the last three months of 2013 although there was a 20% improvement over the course of 2013.  Despite the arrears picture landlords have been successful in paying down mortgages.

LSL Property Services, which runs the tracker, shows that the final three months of 2013 still represent the second best quarter for tenant finances in two years, with 26% fewer households in severe arrears compared to the same period a year ago.

LSL says that those owing more than two months’ rent now represent 1.6% of all tenancies in England and Wales, up from 1.5% in the previous quarter. Despite this, the proportion of tenants in severe arrears has shown a dramatic improvement on an annual basis – down from 2.2% of cases in Q4 2012.

A moderate setback in levels of the most severe arrears contrasts with wider improvements in tenant finances as a whole. According to LSL’s latest Buy-to-Let Index, overall tenant arrears fell in November, with 6.6% of all rent late or unpaid . This compares with 7.1% of all rent in the previous month.

Paul Jardine, director and receiver at Templeton LPA (which is owned by LSL), says: “Economic prospects appear to have transformed since this point last year, with a pervading confidence taking hold.  But households are still heavily indebted, and wages are only starting to very dimly reflect a brighter economic picture.  After a year of dramatic changes, the closing stages of 2013 have been no less intense for anyone struggling with the monthly rent.  For many people the festive period has provided a particularly difficult ending to a long and challenging year.

“Household budgets will remain under intense pressure in 2014 – the situation for many tenants is not easy by any means.  But even with the strains of Christmas and New Year, severe rental arrears are in a much better state than they were just six months ago.  That could point towards fewer people facing eviction in months to come.”

Eviction Rates & Landlord Finances

Annual improvements in severe tenant arrears are yet to feed into eviction rates say the firm. According to the most recent data, the number of tenants facing eviction through court order rose in the third quarter of 2013, with a total of 30,807 tenants facing eviction notices. This represents a quarterly increase of 11%, up from 27,784 in Q2 2013.

Landlords have continued to benefit from overall improvements in the financial position of tenants, with landlords’ own mortgage arrears falling for the fourth quarter in a row, continuing a long-term improvement.  By the end of Q3 the number of buy-to-let mortgages over three months in arrears stood at 17,500, down 1.1% since the first quarter.  This brings the number of buy-to-let mortgages more than three months in arrears to the lowest level since 2008, after falling by 20.1% over the course of 2013.

Jardine adds: “Since the peak of the recession in 2009, landlords have been paying down mortgage arrears at a steady pace. Now that progress is gradually returning the market to normal, with levels of buy-to-let mortgage arrears back at 2008 levels.  But further progress will require continued caution.  Tenants are still gradually paying back late rent – but are doing so against a financial background that is still getting tougher for most households.

“Compared to 2007 and before, there is still a long way to go.  And there will be obstacles along the way.  Certainly on a more individual scale there are likely to be setbacks.  So landlords need to keep communicating with their tenants.  No two tenancies are the same, and when difficulties do arise, having the best information to hand is vital to finding the best course of action for everyone involved.”

1 thought on “Rent arrears increase in last three months of 2013 though buy-to-let mortgage arrears fall”

  1. Leaders says:

    RRent arrears are a real concern for every
    landlord. But in our experience, rent arrears can be successfully controlled by
    stringent tenant vetting and proactive management throughout the tenancy.

    Just 312 tenancies of more than 27,500 managed by us were in arrears by 30 days
    or more in January 2014. That’s just 1.1% compared with an industry figure of
    6.6% of all rent late or unpaid in November 2013 (according LSL Property
    Services’ Tenant Arrears Tracker).

    We rigorously vetall prospective tenants, which
    includes a detailed interview and assessment of their ability to afford the
    rent, full credit and ID checks, proof of residency and references from
    employers, former, landlords and banks. if a tenant does fall into arrears
    (the most common reason being an unforeseen change in circumstances such as
    losing their job or splitting up with a partner) we find that being proactive and communicating with them
    early on makes a big difference. Serving the correct legal notice at the
    correct time is also crucial to protect the landlord’s interests. With this
    approach, in most cases of rent arrears, the situation can be
    satisfactorily resolved without the need for the landlord to go to court.

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