Rising rents push more into debt

Rising rents have prompted a record 12,000 tenants who are struggling with arrears to contact a debt advice charity this year.

The Money Advice Trust (MAT) says the number of calls it dealt with about rental arrears between January and August was the biggest in the 26-year history of its National Debtline and around double the number it received during the same period in 2007.

Key Points
• Record number with rent arrears contact debt advice charity
• Comes as rents are rising
• Mortgage lending criteria has also tightened

The share of its clients who have fallen back with their rent is also increasing, and stands at nearly one in 10, compared with 8% last year and 6% five years ago. The charity warns of a “dangerous spiral”, with tenants sinking further into debt as increased demand in the sector pushes their rents up even higher.

Rising costs

The rental sector has become overheated as people struggle to get on the property ladder, either because they cannot raise the 20% deposit often demanded by lenders or meet their toughened borrowing criteria.

A report by the Yorkshire Building Society yesterday found would-be first-time buyers face spending more than eight years saving for a typical deposit of £26,000.

As more people remain in the rental market for longer, the increase in demand means rents are pushed up further and tenants face an even tougher time meeting their payments.

Rents rose for five months in a row to reach a new high in August of £734 on average a month, according to a recent study by LSL Property Services, which owns chains Your Move and Reeds Rains.

‘Dangerous spiral’

Joanna Elson, chief executive of the Money Advice Trust, warns sharp jumps in rents could push some households “over the edge”.

She says: “Rising rent prices are not only making it harder for people to save for a deposit, they’re also pushing more people in debt.

“This is a dangerous spiral; with increasing numbers of people entering the renting market, and fewer people leaving it, it is hard to see how the situation will improve.”

The MAT says tenants who find themselves struggling should seek out free, independent advice as well as speaking to their landlord.

It adds that rent should be treated as a “priority debt” and should come before payments such as credit card debts and personal loans.