Recent findings from deposit alternative provider Reposit have uncovered a concerning trend in the UK rental market: a significant proportion of tenants are resorting to borrowing money to secure their rental accommodation.
According to Reposit's latest survey of 1,000 current renters, nearly half (48%) of tenants across the UK have borrowed money to pay for their cash deposit. The borrowed amounts are substantial:
● 6% secured £1,500 or more
● 18% borrowed between £1,000 and £1,500
● 24% obtained between £500 and £1,000
This follows previous research which found that 38% of tenants were relying on friends and family, credit cards, personal loans, or overdrafts to cover their lump sum deposit costs.
Regional and Demographic Variations
Interestingly, the research challenges assumptions about deposit affordability based on regional rent prices. Despite generally lower rents in the North, a larger percentage of tenants in the North East are borrowing higher amounts exceeding £1,500. In this region, the average agreed rent is £947 per month, resulting in an average five-week cash deposit of about £1,184.
Similar patterns of higher borrowing were observed in the West Midlands (average monthly rent £1,078), London (£2,772 PCM) and the East Midlands (£1,034 PCM).
Age and gender also play a role in deposit borrowing patterns:
● Those aged 18-34 were the most frequent borrowers
● The 55-64 age group was most likely to borrow the highest amounts (£1,000-£1,500+)
● Women generally needed to borrow higher amounts than men
This research challenges a fundamental assumption in the rental market: that the ability to pay a cash deposit indicates financial stability. Ben Grech, CEO of Reposit, explains: "Our research demonstrates that this is just a myth. In fact, tenants are borrowing money to be able to pay a cash deposit. This puts them in a more precarious financial position right before moving into a property, which is not at all what most landlords would want."
For landlords, this raises important considerations:
● Tenant Financial Health: Tenants who start their tenancy in debt may face greater challenges in maintaining rental payments, potentially increasing the risk of arrears.
● Alternative Assessment Methods: As Grech notes, "a tenant's capacity to pay the monthly rent in full is best assessed by quality referencing and affordability checks carried out by specialist providers."
● Deposit Alternatives: The research highlights the growing importance of deposit alternative products in the market, which could reduce initial financial strain on tenants.
The Changing Landscape for Landlords
With the Renters Rights Bill approaching, landlords are increasingly focused on assessing tenants' financial stability to mitigate risks associated with rent arrears, potential evictions, and disputes.
Standard practice now typically includes:
● Credit history checks
● Identity verification
● Affordability assessments (Reposit, for example, requires tenants' salaries to be at least 30 times the monthly rent)
Another factor driving change is the current interest rate environment. More tenants are reassessing the opportunity cost of having substantial sums tied up in rental deposits when they could be earning higher interest elsewhere.
For landlords, understanding these shifting dynamics is crucial for making informed decisions about tenant selection, deposit requirements, and potential adoption of deposit alternatives.
For tenants, the increasing financial burden of deposits represents a significant hurdle to accessing rental accommodation, particularly as rental prices continue to rise across most regions.
As the rental market continues to evolve, both landlords and tenants would be wise to consider the full spectrum of deposit options available, balancing protection for landlords with affordability for tenants.
With deposits now averaging around £1,218 according to Reposit data, this represents a substantial financial commitment that is reshaping how rental transactions are structured and financed across the UK.
At David Harris & Co, we understand what makes Finchley unique. Whether you’re letting or renting, our local expertise ensures we can guide you to the best decisions for your needs.
Ready to explore Finchley’s rental market? Contact David Harris & Co for expert advice and a stress-free experience. Call us on 0208 346 9122 to get started.
