In comparison rents increased by 1.9% annually to October 2013, while the year before that they rose by 3.4%.
As rental rises have slowed cases of arrears have also fallen to 6.9% in October compared to 7.2% in September and 7.1% in October last year.
Just 1.4% of all tenancies are facing more than two months rental arrears compared to 1.6% in Q3 2013 according to the latest quarterly Tenant Arrears Tracker from Your Move and Reeds Rains.
David Newnes, director of estate agents Reeds Rains and Your Move, said: “Rents have edged to a new record and the rental market is pulsing with new demand.
“Yet at the same time, tenants are getting on top of their finances – helped by a cooling pace of such rent rises.
“Better affordability is good for tenants in the longer run too – and for landlords who can rely on steady revenue to pay the bills.
“That helps to support a virtuous cycle of only gradual rent rises.
“Alongside slower overall inflation, a material boost to the supply of properties available to let has helped keep rents from rising as quickly as in previous years.”
Rents in nine out of 10 regions of England and Wales are higher than a year ago, with the East of England (4.9%) leading the way followed by the East Midlands (3.6%) and the North West (3.1%).
London rents have grown at the slowest rate, up by 0.5% to October 2013, while rents in the North East decreased by 0.5%.
For landlords annual rental returns stood at 13.3% annually to October, the joint highest return on record, up from 8.2% the previous year.
Landlords in England and Wales have seen a return of £22,434 in the last 12 months, while this is made up of £14,030 in capital gains and £8,404 in rental income.
Newnes added: “Landlords have benefitted from a spurt of rapid house price growth. But as price rises steady a little, landlords can rely on newly stable rental yields.
“Gross yields on a typical property dipped over the last six months as purchase prices grew faster than rents, and now yields have steadied again, just above the long-run average of 5%.
“Stable yields aren’t the only good news for landlords. Letting a property now involves even less risk of not getting the rent on time, and tenant arrears could reach a new record low in the coming months.
“That should boost demand from tenants and investment from landlords. Good news on the affordability of renting is good news for the whole industry.”