It's good news for landlords as the number of tenants in severe arrears has fallen for the first time in over a year.
New figures from Templeton LPA have shown that in the final months of 2012, the number of tenants in arrears of more than two months fell by 15.6pc. This contrasts with the trend in the preceding four quarters, where severe arrears rose by an average 10.8pc per quarter.
The number of tenants in severe arrears fell by 16,000 in the fourth quarter to 86,000 – or 0.3pc – the lowest level since the final quarter of 2011. Such tenants now represent 2.2pc of tenancies in England and Wales, down from 2.5pc in the previous quarter.
While severe arrears cases (tenants with arrears of more than two months) fell back rapidly, there was also a wider improvement in tenant finance. According to LSL's latest Buy-to-Let Index, overall tenant arrears fell in November, with 7.4pc of all rent late or unpaid. This compares with 8.1pc in the previous month.
"Tenants' finances have suffered a gruelling combination of rising living costs and rental inflation throughout much of 2012," said Paul Jardine, director and receiver at Templeton LPA. "With many budgets balanced on a knife edge, a slight reprieve from rapid rent rises towards the end of the year has been very significant. But the recent strength of the labour market has played the biggest role in halting the upwards climb in the number of tenants in severe financial difficulty."
Mr Jardine pointed out that unemployment has fallen dramatically to 7.8pc, with 44,000 more full-time jobs in the three months to November. He said that fewer households have faced seeing their monthly income halted and their ability to meet the monthly rent cheque hampered. "If the UK's economy can avoid falling into a triple dip recession in 2013, a further improvement in employment levels will go some way towards preventing arrears cases from rocketing up," he said.
However, those facing eviction through court order are yet to feel the impact of a better financial situation for tenants. In the third quarter, 25,756 tenants faced eviction notices, a quarterly rise of 5.5pc. On an annual basis this puts evictions marginally up, increasing 0.25pc from a year ago.
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