Landlords have increased rental prices to their highest level for two years, as people shy away from buying a home
The cost of renting a home in the UK increased by 1.4% in August, the steepest rate seen since August last year, research conducted by LSL Property Services shows.
The average monthly cost of renting finished last month at £686, meaning letting a home is as costly as it has been since September 2008.
Renting currently costs 2.5% more than at the same time last year on average, with today's figures following seven consecutive months of price rises
In July alone, landlords increased the price of renting by an average of 0.5%
The increasing trend of people deciding to rent has been blamed on a combination of factors, including an impending price crash putting people off buying, the effects of Government cuts and the limited availability of good mortgage rates.
"All these factors have shifted the power back into the hands of landlords, driving up rents," said David Brown, commercial director of LSL Property Services.
Rent increases were led by landlords in the South East and London.
In these areas average rent went up by 2.8% and 2% respectively, whereas landlords in the West Midlands and Wales found themselves forced to reduce rent by -1.5% and -1% respectively.
August also brought with it a sharp rise in tenant arrears, with arrears totalling £266.3 million, or 11.3% of all rent in the UK. This is up 25% from £212.9m (or 9.2%) in July.
The increase in tenant arrears was largest in the North East, where unpaid rent rose from 10% in July to 14.4% in August – the biggest increase of all the regions.
"Rents have been rising all throughout this year but they haven't affected tenant arrears until this month," commented Mr Brown
"But now arrears are up - in fact they are rocketing in the North East. Tenants everywhere are only going to come under further pressure as the cuts keeps coming, but it's possible we'll see a significant north-south divide develop."
The rise in rents alongside house prices remaining static for three months means that an investor buying property now could expect a total annual return of 9.3%, the equivalent of £15,711.
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