Buy-to-let landlords are being warned of a rise in the number of UK tenants in "severe arrears".
The Tenant Arrears Tracker, published by LSL Property Services, shows the number of renters more than two months behind on payments rose by 4,000 to 94,000 in the first quarter of 2013 - an increase of nearly 5 per cent. This represents 2.3 per cent of all tenants in England and Wales.
The statistics suggest an improving trend has gone into reverse. Severe arrears were running around 50 per cent higher in 2012 than in 2011 but the number had improved significantly toward the end of the year. The number of cases fell by 14.5 per cent in the final quarter.
LSL said severe arrears over the past 12 months are now 20 per cent above the long-term average and that eviction by court orders are also running at a record level and 10 per cent higher than a year ago.
In the final quarter of 2012, 25,286 tenants faced eviction notices, a quarterly rise of 5.7 per cent.
Paul Jardine, director at property receivers Templeton LPA, which is part of LSL, said: “Household finances are feeling the impact of spiralling costs, particularly energy bills, which were recently predicted to grow by an average £214 this year. And wallets are under pressure from the other side.
"According to the ONS wages are creeping along at 1.2 per cent annual growth, well behind a rebounding rate of inflation. Many tenants have finally pulled their finances back together after the strain of the festive period. But for a significant minority the situation is actually much worse than three months ago, and this is reflected in the most severe tenant arrears."
The figures reflect a divergence where more tenants are running into severe difficulty while the number a little behind on rents has improved. According to LSL’s latest Buy-to-Let Index, overall tenant arrears fell in February, to levels not seen since November 2012, with 7.4 per cent of all rent late or unpaid.
Templeton also says buy-to-let landlords are being given breathing space by falls in buy-to-let mortgage rates, thanks to the Bank of England's Funding for Lending Scheme, which has offered loans to banks and building socieities with rates
The number of buy-to-let mortgages over three months in arrears in the final quarter of 2012 fell by nearly 20 per cent on a year earlier, based on data from the Council of Mortgage Lenders (see the chart below).
Mr Jardine said: “In the first few months of 2013, lower mortgage repayments have allowed landlords more room for flexibility. As hoped, Funding for Lending has proved instrumental in lowering mortgage rates, especially for landlords with the most equity."
But he added: "While the current environment allows landlords more time in any given month to wait for a payment, it doesn’t fundamentally change the ability of tenants to pay rent. The latest rise in eviction orders highlights the need for long-term solutions that work for both parties."
Millions of Britons, faced with rock bottom returns elsewhere, have turned to property investing. Last month, figures from the Council of Mortgage showed nearly 1.5m investors held buy-to-let mortgages by the end of 2012.
As a total, £16.4bn was lent on landlord mortgage, up 19 per cent on a year earlier and the highest level for four years.
Rises in rents in recent few years - partly a result of more priced-out first-timer buyers being forced to rent - have inflated the income landlords can earn.
Buy-to-let mortgages in three months arrears