Tenant Arrears at Lowest Level in Ten Years

Latest News/19.08.2021

It’s good news for landlords as tenant arrears have fallen to the lowest level in ten years. According to new research, this fall in tenant arrears has been fuelled by landlords providing essential help during the pandemic including rental discounts over the last 18 months, in a bid to provide vital assistance to their tenants. The survey demonstrates the reliability of landlords during the pandemic as they acted quickly to support their tenants during an extremely challenging time.

The report from Paragon Bank found that from April to June this year, the number of renters who fell behind on their rent was 1.3 per landlord – in the first quarter of this year this was 1.6 per landlord. The current rate is the lowest figure in a decade.

Tenants with rent outstanding was 2.1 per landlord between April and June last year when the pandemic started to hit residents’ finances. In the first quarter of this year, the typical tenant owed £2,376, and in the second quarter this was £1,781. The good news is that this figure has been on the decline and the current average amount of outstanding rent is at a four-year low, falling by £595 per tenant over the last three months. This is the lowest amount of rental payments owed to landlords since December 2017. The research also shows that 17% of portfolio landlords missed out on income compared to 12% of single property landlords.

It’s worth noting that the current low arrears levels are a result of landlords providing tenants with rental discounts or payment holidays in a bid to help their finances during a difficult time. A separate survey of landlords and tenants by Shawbrook Bank found that 46% of landlords reduced monthly rent payments at some point during the pandemic. In fact, 28% gave a payment holiday, while 18% gave their tenants a reduction in rent. In addition, 38% of landlords changed their tenants rent and landlords lost an average of £7,500 as a result of payment holidays and £6,500 as a result of rent reductions. Rental payment holidays lasted an average of three months and rent reductions lasted on average four months.

These figures demonstrate the reliability of landlords during the pandemic as they acted quickly to support their tenants during a global crisis.

A good time to invest?

With arrears currently at low levels and requests for financial support on the decline, now could be a good time to invest in rental property. There has been a significant number of landlords exiting the buy to let market over the last few years, but it appears that there are signs of confidence returning to the lettings market. Rents are increasing across the UK (with the exception of London) as demand for rental property increases, and banks are increasing their buy to let mortgage offering with rates as low as 1.9% there has been a relaxation of the tightened lending criteria we saw during the pandemic.