Private landlords in the United Kingdom are being warned they face an increase in the amount of arrears during 2012. Soaring rents in 2011 saw the level of tenants in serious arrears go up to 18% and with rents expected to again increase this year, the number of court orders to evict tenants is expected to rise proportionally as landlords take a tougher stance.
According to the latest Tenant Arrears Tracker by Templeton LPA, the soaring cost of renting has created a two speed market. Tenants have coped quite well with increasing rents and soaring living costs, however, there is a growing minority of renters who are falling deeper and deeper into arrears, and the number of severe arrears cases is also rising. Severe arrears cases are typically those where tenants have arrears of more than two months and this number is expected to slowly increase further throughout the year as the economic outlook worsens.
Landlords are expected to be less lenient with any tenants facing payment problems and more and more are expected to charge higher rents to set aside funds for future arrears and void periods. Private landlords are also spending more time online looking for a competitive landlord insurance quote as they look to cut their own costs.
Mr Jardine from Templeton LPA said: “The growing level of severe tenant arrears has yet to filter through into mortgage payment problems for landlords. Mortgage rates have kept monthly payments low, but there has also been a change in landlords’ behaviour. With capital gains falling by the wayside in the past six months, rental income has become the most important component in an investor’s annual return – but it also pays a landlord’s mortgage cheque. Our research also shows a rise in the number of tenants being evicted through court orders.”