A growing number of private tenants are falling behind on their rent, which in-turn damages the ability of landlords to pay home loans and other creditors back, insurance group AXA said on Saturday.
AXA said a survey conducted by YouGov on its behalf showed buy-to-let landlords hoping to hike rents to offset higher mortgage costs could be in for a shock as the credit crunch leaves tenants cash-strapped.
It said 7 percent of private tenants had slipped into arrears in the last three months — just over half the number 12 months ago.<!–more–>
More than half of all private tenants polled said they were increasingly concerned about being able to afford their rent.
Research shows that over a third of people privately renting are doing so because they can’t get a mortgage at the moment. On the surface of it, the rental market should be buoyant, but many of those renting may be struggling to make ends meet which is not all good news for buy-to-let owners.
The housing market is in the midst of a sharp correction after a decade-long boom, largely due to a global credit crunch, which has pushed up the cost and shrunk the availability of any type of credit such as personal loans and mortgages.
Benchmark house price indexes from mortgage providers Nationwide and Halifax indicate the average cost of a home has dropped by some 10 percent since last summer. Anecdotal evidence from estate agents suggests house prices may have already fallen by around double, bolstered by recent auction prices which have fallen by around 20 percent.
Unlike owner-occupiers, buy-to-let landlords have the option of raising rents to offset costs. Job security is also less of an issue for buy-to-let landlords since they can access a growing pool of alternative private renters.
But they could still be left financially strapped if more and more tenants fail to pay the rent.
The YouGov poll was carried out online on July 22 to 30. The sample size was 8,372 adults, of which 1,046 rented from a private landlord.