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Many landlords are worried that they will face problems paying their buy to let mortgages as more tenants are struggling to pay their rents.
Job losses, pay cuts and tax rises are hitting hard – with 40% of letting agents reporting tenants in financial difficulties and have problems with handing over their rent in the latest rental conditions survey from the Association of Residential Letting Agents (ARLA) for the last quarter of 2010.
That’s a 10% increase on the previous quarter and the first rise for 18 months.
Landlords in London are having a slightly better time, with letting agents saying three out of 10 are reporting problems collecting rent.
Ian Potter, ARLA’s operations manager, said: “At the beginning of 2010 we predicted that the number of tenants having difficulties paying rent would increase and unfortunately, this seems to be the case today.
“It is a situation which can have serious repercussions throughout the private rental sector as, without guaranteed rent income, landlords may also have problems paying mortgages. At worst, it may result in a rise in repossessions.”
More tenants are haggling over their rents
ARLA’s research also revealed a rise in the number of tenants haggling with landlords over rents, rising from 44.5% to 47.1%, further indicating the financial pressures on tenants.
ARLA suggests landlord and letting agents should have a robust tenant selection process and should carry out checks on credit history and references to try and spot tenants who might have future financial problems.
“It’s difficult for landlords to predict whether current or prospective tenants will hit financial difficulties, our research highlights the importance for landlords or agents to implement a thorough selection process and to conduct reference checks on potential tenants – and to consider the benefits of rental protection insurance,” said Mr Potter.
The news comes hot on the heels of a disclosure from Shelter that more than 2 million people pay their mortgages and rent with a credit card – a figure that has doubled since the end of December 2009.
The Council of Mortgage Lenders, the voice of the UK’s biggest banks and building societies, scoffed at the inference borrowers were paying by credit card and claims the majority with credit problems are tenants in privately let homes.
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