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Lowest rental arrears in ten years – the complete picture?

From Robert Ulph on August 27, 2021

Recent research into rental arrears has positive headlines, reporting the lowest number of tenants with an outstanding rental payment in over ten years.

This on the face of it is good news for landlords and tenants alike. Nobody wants to have outstanding rental payments due to them. Being owed money makes life difficult, so this should help landlords manage their rental property more effectively. Tenants don’t choose to be in debt with arrears.

But does the research headline give the complete picture?

According to the study, carried out by Paragon Bank, in the second quarter of 2021, landlords had an average of 1.3 tenants with an outstanding rental payment. This is the lowest figure since the opening quarter of 2011.

In the opening quarter of 2021, landlords had an average of 1.6 tenants with an outstanding rental payment. If you are looking at the annual figures, there has been improvement too. In the second quarter of 2020, landlords had an average of 2.1 tenants with an outstanding rental fee. This was during the heart of the pandemic, so it is no surprise to see the figure at that time being higher.

There has also been a drop in the average amount of rent owed to landlords. The latest figure is a four-year low, which looks like another positive factor for landlords.

Housing analysts are concerned however that as the government’s furlough scheme winds down next month as well as the deferred mortgage payments, that some landlords have made use of with their lenders, come to an end, these figures on rent arrears could change.

Some landlords have been able to financially support their tenants over the past year or so because of these schemes and the Paragon Bank study, which spoke with more than 750 landlords, found that 36% of landlords had agreed to some form of rental change at their tenants’ request. This included a 20% reduction in rent.

If any landlord is unsure what this could mean to them in terms of the furlough scheme ending or their mortgage payment terms changing, I cannot stress enough to seek professional advice.

I also urge any tenants who could be facing financial difficulties with any changes to their employment or income, to contact their landlord or letting agent as soon as possible to discuss what options might be. It is always best to avoid rent arrears and the uncertainty this brings. Financial difficulty can have long-term implications for their landlord and on the future of their rental, especially significant at a time of such low levels of available property in the private rented sector.

At Pennington we can advise what can be arranged so that both tenants and landlord come through these latest changes in the best way. As always if you need advice on this or anything else on the local property market, please call me as I am always happy to help.