Increase in buy-to-let mortgage arrears ‘shows importance of using proactive agent’

Mon 19 Feb 2018

More buy-to-let landlords are experiencing mortgage arrears, with one property expert suggesting the trend highlights the importance of working with an experienced and proactive letting agent.

New figures from UK Finance show there were 5,100 buy-to-let mortgages with arrears of at least 2.5 per cent in the last three months of 2017, up on the same period in 2016.

Allison Thompson, managing director at lettings specialist Leaders, says: “Mortgage arrears are always a worry for landlords, with the statistics showing some 1,200 mortgages recorded arrears of more than 10 per cent of the outstanding balance.

“They are often the result of tenants failing to pay their rent in time, with the lack of funds forcing landlords to miss their own payments.

“This rise in arrears should serve as a reminder to landlords of taking steps to minimise the likelihood of facing rental arrears and, should they occur, being in a position to act swiftly and decisively.

“The best option is always to work with an experienced, hands-on letting agent. At Leaders we see consistently low levels of rent arrears among our landlord clients compared with the wider industry. We put this down to two key factors: careful vetting of prospective tenants and proactive management throughout the tenancy.”

Leaders’ vigorous vetting procedure includes a detailed interview and assessment of the tenant’s ability to afford the rent, full credit and ID checks, proof of residency and references from employers, former landlords and banks. Stringent checks are also carried out on guarantors.

“Although the most common reason for tenants to get into arrears is an unforeseen change in circumstances - such as losing their job or splitting up with a partner – which no amount of vetting can prevent, managing the situation carefully helps to minimise the landlord’s losses," Allison explains.

"We know from experience that being proactive and communicating with tenants who are having difficulty paying their rent on time means most rent arrears cases can be satisfactorily resolved without the need for the landlord to go to court.”

For some landlords, rent arrears can mean they are unable to pay their mortgage or other essential living costs. Even those with a financial cushion will find their investment in jeopardy if they experience ongoing loss of rent. For those wanting to negate the risk entirely, paying extra for a rental warranty is an option.

Allison adds: “At Leaders, we also offer a Premier Rent Guarantee Service, which includes us paying the rent to our landlords in the event of a tenant defaulting. This provides landlords with ultimate peace of mind and allows them to enjoy complete certainty when it comes to budgeting and paying the mortgage.”

UK Finance added the latest increase in arrears on buy-to-let mortgages comes after a lengthy period in which arrears had been falling.

For more information on how to make the most of your buy-to-let investment contact your local Leaders branch.