Rent arrears hit a two-year high

The number of tenants in the UK’s rental properties with severe rent arrears has reached a two year high, according to a new report.

In the Tenant Arrears Tracker, which is put together by Your Move and Reeds Rains, found that there are more than 74,000 tenants who owe more than two months’ rent.

The number is up 4.4% on the previous quarter and 7.2% higher than the same period last year.

The figures suggest that there are now more than 5,000 households struggling with significant arrears than there were 12 months ago.

However, the report also points out that while this situation appears to be serious the level of rent arrears is better than it has been historically.

The worst peak of rent arrears recorded by the index

 
The report points to the third quarter in 2012 when there were more than 160,000 households classed as being in severe arrears. This was the worst peak of rent arrears recorded by the index.

In addition, the report also highlights that the probability of a tenant falling into serious arrears is ‘extremely low’ and that the number of households in serious arrears constitutes 1.4% of all private rental tenancies.

To compare the current situation, the report points to the first quarter of 2008 with 2.9% of tenants – double the current proportion – were in serious arrears and this was before the recession and financial crisis.

In addition, the situation for landlords who are behind on their mortgage repayments continues to improve with 5,700 being in serious arrears.

A director of Your Move, Adrian Gill, said: “Most UK households are now beginning to earn more and rent increases are accelerating.

“There is no boost to household earnings for a small minority and it’s this marginal population who feel the squeeze of rising rents.”

He added that severe arrears are running at a lower level than previous peaks and that the market needs a boost in property supply and he urged landlords to invest more in rental properties.

Buy to let landlords face negative profits

 
Meanwhile, the Residential Landlords’ Association (RLA) says that buy to let landlords are facing huge problems with planned tax changes.

The changes that were announced in the summer budget by the Chancellor are not going to be restricted to wealthy landlords, says the RLA, and even landlords with just one property are facing losses.

The RLA has questioned its 20,000 strong membership and 60% of landlords in the private rental sector say they will be pushed from the lower rate of income tax into the higher rate of 45% because of the Chancellor’s new tax rules.

Reduction in mortgage interest relief until 2020

 
Among the changes announced will be a reduction in mortgage interest relief until 2020 and, the RLA warns, landlords need to be aware that there is a complicated calculation involved in working out taxable income.

The RLA says that landlords will be paying £665 million more in tax by 2020 in a tax system that will hit landlords in the pocket.

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