The data from the estate agency chains Your Move and Reeds Rains, part of LSL Property Services, shows that in the fourth quarter of 2014 there were 68,100 tenants in severe rent arrears of more than two months, an annual rise of 7.2%.
However, on a quarterly basis the setback is less severe, with 1,700 more cases of severe arrears in the quarter compared with the last quarter of 2013, a quarterly increase of 2.6%.
Despite this recent deterioration, the longer term trend for tenant arrears remains positive, the report suggests as improvements seen in 2013 and at the start of 2014 remain overwhelmingly large in comparison.
As a result, since reaching a peak of 116,600 tenancies in the third quarter of 2012 the number in severe arrears has dropped by 48,500 as of the fourth quarter of 2014, an improvement of 42%.
In terms of the proportion of all tenants now in severe arrears, there was no significant setback in the last quarter. As a percentage of all tenants, 1.4% owed rent arrears of more than two months in the fourth quarter, the same as in the third quarter of 2014 and the fourth quarter of 2013. This leaves a remaining 98.6% of tenants who have consistently avoided serious rental arrears.
A slight deterioration in the most serious rental arrears is consistent with figures for overall levels of late rent including shorter lapses on payments. According to the latest Buy to Let Index from Your Move and Reeds Rains, overall tenant arrears of any duration stand at 7.5% as of November, up from 6.6% of rent late in November 2013. However, as with severe arrears, even after November’s slight deterioration, rent arrears remain considerably lower than in previous years, since peaking at 14.6% in February 2010.
‘Escaping the worst deprivations of the financial crisis has taken half a decade and even now, for so many households every month is still a difficult month,’ said Adrian Gill, director of estate agents Your Move and Reeds Rains.
‘But just as the occasional setback is inevitable, the long term trend is increasingly clear. Since the sharpest pinnacle of tenant difficulties in 2010 the number in serious rent arrears has practically halved,’ he pointed out.
‘As rising wages start to combine with much lower levels of unemployment, the fundamentals of the economy have started to turn in favour of tenants. If that can continue, then so can the trend away from arrears, as renting becomes more affordable,’ he added.
The report also shows that eviction rates have improved. In the third quarter of 2014 some 28,400 tenants faced a court order for eviction, down 4.4% since the second quarter of 2014. On an annual basis this leaves eviction rates 6.0% lower than in the third quarter of 2013 which is the first annual fall in eviction orders on record since 2010.
In the eighth consecutive month of improvements, the number of buy to let mortgages over three months in arrears has fallen by 7.4% between the second and third quarters of 2014. This leaves just 12,400 buy to let loans in arrears, and means the number of such distressed loans to landlords has fallen by 28.3% on an annual basis.
As a result the number of buy to let loans in arrears is now at the lowest level seen since the first quarter of 2008, before the worst of the financial crisis and ensuing recession.
‘Landlords absorbed a great deal of pain in the immediate aftermath of economic chaos and the plummeting mortgage availability that followed. Now, as tenants mend their income streams, both players in the rental market are supporting one another’s finances,’ explained Gill.
‘Gradually landlords have turned from a defensive mind set, saving what they can from the financial fire, to thinking once again about growing their portfolios and supplying more homes to let. That has been supported by a healthier financial system, but also by a more fundamental improvement in the financial position of tenants,’ he concluded
