Figures released by letting agents show an increase for the first time in 18 months in the number of tenants having problems paying their rent.
A study from the Association of Residential Lending Agents (ARLA) shows 40% of members reported that more of their tenants were struggling to pay rent during the last three months of 2010 than in the preceding six months.
The data also revealed that more tenants are haggling with landlords over rent, from 44.5% to 47.1%. The situation was most noticeable outside central London, where only 27.9% of members reported an increase- In the rest of the UK this figure was 46.4%.
Ian Potter, operations manager at ARLA, said: 'At the beginning of last year we predicted that the number of tenants having difficulties paying rent would increase and unfortunately, this seems to be the case today.
'It is a situation which can have serious repercussions throughout the private rental sector, as without guaranteed rent income, landlords may also have problems paying mortgages. At worst, it may result in a rise in repossessions.
'While it is difficult for landlords to predict whether current or prospective tenants will hit financial difficulties, our research highlights the importance for landlords or agents to implement a thorough selection process and to conduct reference checks on potential tenants - and to consider the benefits of rental protection insurance.
'The same is true for anyone looking to rent a property - do your research before signing up with a new landlord.'