The number of private tenants owing two months or more in rent arrears is falling for the first time in more than 12 months.

After rising for four quarters in a row since September 2011, the number of tenants with serious arrears decreased by 16,000 to 86,000 at the end of December 2012.

Rent receivers Templeton LPA reckons 2.2% of all private rented homes are in serious arrears.

The firm manages private rented homes with mortgage arrears for lenders.

The good news for landlords is the buy to let market is buoyed by the rise in employment – which means more tenants have jobs and are less likely to default on paying their rent.

The figures are particularly encouraging, says the firm, as arrears tend to rise over the Christmas period as tenants put spending on gifts and holidays ahead of the rent.

For  December 2012, 7.4% of all rent was late or unpaid, compared with 8.1% in November, according to the firm.

Director Paul Jardine said: “The recent strength of the labour market has played the biggest role in halting the upwards climb in the number of tenants in severe financial difficulty.

“Unemployment has fallen dramatically, so fewer households have seen their monthly income halted and their ability to meet the monthly rent cheque hampered.”

Despite more rent coming in, the number of tenants served with eviction notices in December was up 5.5% to nearly 26,000.

At the same time, around 22,000 private landlords were three months or more in arrears with their buy to let mortgages at the end of the third quarter of 2012 – up 0.9% compared to a 9% fall in the previous quarter.

“After a year of increasing severe arrears, landlords are more aware of their legal protection than ever, and a more proactive approach to tackling arrears has helped rein in severe tenant arrears,” said Jardine.

The firm predicts cash flow will improve for landlords as rents continue to rise and mortgage rates drop in future months.

Private tenants owing two months or more in rent

Source: Templeton LPA