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BTL mortgage arrears feared by UK landlords as tenant rent arrears increase

PRS Rent Arrears Set To Rise Again in 2012

Rent Arrears are set to rise in the UK Private Rented Sector, (PRS), during 2012 as more landlords face dealing with tenants who cannot afford the rental payments on their residential property.

The UK media reported at the end of last year that the number of court orders to evict tenants had risen by 11% during 2011.

In fact, in the last quarter of 2011:
• 78,970 tenants had rent arrears, with 11,400 more tenants over 8 weeks in arrears than in the same period of 2010, a rise of 18%.
• 24,966 tenants were in the process of dealing with eviction notices, an increase of 11% (22,558 in 2010).

A growing number of tenants face deepening financial difficulties, with many tenants jobs and prospects affected by the UK’s economic malaise and with the implementation of the Government’s Welfare Reforms, the number of tenants facing severe arrears and eviction is set to rise further.

The growing level of tenant’s rent arrears has yet to filter through into Buy-To-Let mortgage payment problems for landlords, but this could change in 2012.

In the last quarter of 2011, the number of Buy-To-Let mortgages more than 3 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 the same quarter of 2006.

Record low, 0.5% Bank of England (BoE) interest rates have kept monthly payments low for those with BTL mortgages tracking the base rate, but there has also been a change in the behaviour of UK landlords. With a healthy rental income becoming the most important component of a property investor’s annual return. Rental income that is sufficient to not only cover the landlord’s mortgage but also provide the landlord with some cashflow.

Landlords are becoming less tolerant of tenants payment problems, and many are seeking eviction as soon as the tenant’s rent arrears reach 8 weeks, using court orders to replace tenants quickly in expectation of finding a financially sound substitute.
UK landlords anticipate that in 2012 due to a growing number of factors, both overall rent arrears and severe rent arrears will rise, leading to increased tenant evictions, hampering the landlords ability to meet their monthly mortgage costs.

This situation that could lead to many disgruntled landlords leaving the Private Rented Sector and a huge increase in Buy-To-Let repossessions.

Legal 4 Landlords offer UK landlords a number of solutions to help them manage their rental property business better.

As well as being the fastest growing UK eviction specialists, Legal 4 Landlords offer a wide range of landlord services including specialist insurance for landlords and Rent Guarantee Insurance.

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