The rise of the rental guarantor

Rental guarantors used to be the preserve of student lets, with landlords wanting financial reassurance to cover those with no rental track record, no regular wage or rental history.

In 2024, however, the latest English Housing Survey revealed more than 940,000 renting households were asked to provide a rental guarantor. To put that figure into context, data held at Statista suggests 598,390 students lived in privately rented properties during the 2021 to 2022 academic year.

So, how did we get in the position of 1 in every 5 tenants, not just students, being asked to provide an alternative bill payer? While the majority of tenancies pass without incident, rent arrears can happen. From an unexpected redundancy or an unscheduled car repair to a cost of living crisis or a surprise tax bill, tenants can find themselves short for a variety of reasons.

Landlords wondering whether a rental guarantor is a sensible step during their next tenancy should bear in mind the following:

• The Office for National Statistics reported that the average UK rent had increased by an estimated 8.4% between September 2023 and September 2024, which has affected affordability.

• Rightmove Hub predicts advertised rents will be 5% higher by the end of 2024 outside of London, and 3% higher in London.

• Mortgage lender Molo found landlords, on average, experience 2.9 late rental payments a year.

• Uswitch revealed that at the end of Q2 2023, just over a third of private tenants were in rent arrears. The value of the average rent arrears claim has risen 15%, up from £1,816 in the first three months of the year to £2,092 in the second quarter of 2024.

• The Renters’ Rights Bill proposes that a tenant must have three months of rent arrears before a landlord can start possession proceedings, up from two months.

Reducing the rent arrears risk

Relying on tenants to pay rent, a fee that is frequently used to pay off a buy to let mortgage, carries some risk, especially as landlords depend on tenants appropriately prioritising what bills are paid first.

A rental guarantor is effectively a credit checked person who, by law, has agreed to step in and pay the rent on the tenant’s behalf if they can’t afford to do so. Unless detailed in the guarantor agreement, a rental guarantor can be called upon within days of a missed rent payment. They can also be held responsible for the cost of any damages, should the tenant not be able to pay for the repairs.

Alternatives to rental guarantors Landlord rent guarantee insurance can be taken out. This policy should cover the rent if the tenant misses payments. Landlords will need to pay for this type of cover and a claim may require the landlord to serve notice for the claim to be valid.

Alternatively, a landlord could stipulate rent is paid upfront, which ensures a set amount of months are covered. Not many tenants, however, will have six months’ of rent saved up and even if they do, the landlord will have to diligently manage the lump sum so their own mortgage payments and buy to let management bills are met.

Tenants turning the tables

While it has become more common for landlords to request a rental guarantor during the tenancy set up stage, anecdotal evidence suggests tenants are using rental guarantors to gain a competitive advantage during the offers stage.

It shouldn’t come as a surprise, given Zoopla’s latest rental index revealed 21 Brits are now competing for every available property to rent. A ready made rental guarantor sends the right signals to a landlord. It says ‘I’m less of a risk and I’m ready to seriously proceed with the tenancy’, perhaps giving them the edge over other renters.

If you'd like to know more about rental guarantors, as a landlord, a tenant or as someone who has been called upon, our lettings team is here to help.