Arrears are set to rise in the buy-to-let market, as more landlords face having to deal with tenants who cannot keep up their rent payments.
According to research by Templeton LPA, a specialist practice of LPA Receivers, the number of court orders to evict tenants is up by 11%.
In the last quarter, 24,966 tenants faced eviction notices – an increase of 11% on 22,558 a year ago.
The number of tenants in severe financial difficulty has also shot up in the last three months, says the firm.
During the last quarter of 2011, there were nearly 11,400 more tenants over two months in arrears than in the same period of 2010 – a rise of 18%.
At the end Q4 2011, nationally there were 78,970 tenants in England and Wales in severe arrears.
Paul Jardine, director and receiver at Templeton LPA, said: “A growing minority of renters are falling deeper and deeper into payment difficulties, and the number of severe arrears cases is rising.
“While the wider tenant mix has changed since the mortgage market downturn – with a greater number of financially sound yet frustrated first-time buyers – a growing number of tenants are seeing their job prospects affected by the UK’s economic malaise.”
He said buy-to-let mortgage arrears have not yet felt the impact of growing severe tenant arrears and evictions, but this would change this year.
In the last quarter of 2011, the number of buy-to-let mortgages more than three months in arrears fell by 7% compared to the previous quarter, representing an annual decline of 17%.
However, at 26,300, there are still more than five times as many buy-to-let mortgages in severe arrears compared with Q3 2006.
Jardine 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.
“As a result, many landlords are being less lenient with tenants facing initial payment problems, and are looking to use court orders to replace tenants quickly in expectation of finding a financially sound substitute – and potentially an increased rent.
“Nevertheless, we expect that mortgage arrears will climb this year.
“We anticipate that both overall arrears and severe arrears will rise, and this will feed into increased tenant evictions and hamper a growing number of landlords’ ability to meet their monthly mortgage costs.”
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Comments
Of course incidence of rent arrears is on the increase especially regarding housing benefit tenants when prior to 2007 April this was not the case as the payment for their rent went straight to the landlord. The previous government’s lunatic policy of issuing rent payments to the tenant rather than paying it directly to the landlord has only served to worsen the problem of rent arrears but the current government is still continuing with it. How crazy is that?!
I have personally lost upwards £7000 in unpaid rent which some of my DSS Tenants have squandered on items and lifestyle choices they would not normally be able to afford rather than passing the Local Housing Allowance money to me to pay for the roof over their heads. I have had to borrow heavily on credit cards in order to replace these lost payments.
These unscrupulous tenants are thus not only stealing from me but from the council and also from the taxpayer and are living rent free into the bargain. They are true parasites and two successive governments have now let them get away with it!
You take these non rent payers to court and they don’t care. They have nothing to lose and getting a CCJ means nothing to them. The court procedure is antiquated and slow; the tenant rarely turns up and you end up throwing good money after bad just to get your house back so you can let it to someone reliable.
I have now made a New Year’s resolution – no more DSS tenants. This is sad for those genuinely honest people who find themselves out of work and on benefits that have good morals and high standards and do pay their rent and act responsibly in conducting their tenancy but I am not a registered charity and who is going to be charitable towards me if I can’t pay my mortgages?