Buy to let rents slipped by a few pounds as savvy landlords cut rents to tempt tenants to move in to new homes rather than leave them standing empty over the holidays.

The tactic reflected a 1.2% drop in average rents to £684 per month – the lowest average monthly recorded since July – and halted the 12-month rise in rents enjoyed by landlords up and down the country.

Yields also fell slightly to 4.9% for December, in line with falls in rents and house prices, according to the latest Buy-to-Let Index from LSL Property Services, that owns the country’s largest lettings agent network, including Your Move and Reeds Rains.

The outlook was not bad for all buy to let investors.

Rents dropped away faster in Wales, down 2.6%, while average rents also dropped in the south east (2.5%) and London (2.3%), but landlords in other areas saw income increase – rents were on the up in the west midlands (2.2%) and south west (1.7%), while there were smaller increases in the east midlands and north east.

Tenants owe £276 million in unpaid rent

Christmas also had a negative impact on tenant finances. 11.7% of all UK rent was unpaid or late by the end of December, rising from 9.7% in the previous month. Unpaid rent totalled £276 million across the UK in December, the highest total since December 2009.

Following a steady fall in property prices over the past three months, the total annual return on a property has dropped to 7% in December – the lowest return since November 2009. This is now the equivalent to £11,431 – £7,332 in rent, and £4,099 in capital gains.

LSL director David Newnes said: “The slowdown in rents is due to landlords offering properties during the holiday season often lower the asking rent to avoid a costly void.

“If a landlord cuts the rent by 5% to fill a property immediately, he will save £275 over the year rather than seeing their property vacant for the duration of the month.

“Nevertheless, with the supply of mortgages to both first-time buyers and would-be landlords still constrained, we are likely to see rents re-start their upwards march before the spring.”