Rent arrears dive as year-on-year B2L returns jump

Rent arrears hit a two-year low of £213m in July despite landlords raising rents for the sixth month in a row.

The latest buy-to-let index from LSL Property Services shows the average rent now stands at £676 – 2.3% higher than July last year. The average rent grew 1.4% between May and June this year and 0.5% between June and July.

Arrears have dropped to 9.2% of all rents – down from 11.2% at the start of the year.

Total returns on buy-to-let dropped slightly to 10.1% in July from 12.3% in June with the average landlord making a return of £15,961. But year-on-year total returns were up from -6% in July 2009.

An investor buying property now could expect a total annual return of 3.5%, the equivalent of £5,838.

David Brown, commercial director at LSL Property Services, says: “We don’t expect rents to fall. With inflation well above target, interest rates can only go one way – north.

“When they rise, landlords will face increased monthly mortgage repayments and many will try to raise rents to cover the difference.”