More than half of renters who choose a deposit alternative product are funding their moves with the money they would have otherwise spent on a five week cash deposit, while around one quarter are using the lump sum to save and invest, research has shown.
Conducted by leading deposit alternative provider, Reposit, a survey of more than 1,500 tenants showed 55% were using the cash to help towards moving costs such as buying furniture.
Nearly a quarter (23%) are choosing to put the money into savings accounts, 4% are investing elsewhere and 7% are repaying debts. 44% are using the money to help with the general cost of living and 4% funded a one-off purchase such as a car or a holiday. Respondents were able to select multiple answers.
The average cash deposit is now £1,292 according to Reposit data – an amount which has increased by 50% in just three years from £860. This is alongside climbing rents, now averaging £1,122 a month following increases in mortgage rates which have significantly impacted landlords and consequently affected tenants.
A total of 96% of those surveyed thought deposit alternative products were useful to ease cost of living pressures and 98% felt all tenants should be offered a deposit alternative at the start of every tenancy.
CEO of Reposit, Ben Grech, said the research showed deposit alternative products eased financial complications for tenants whilst also protecting landlords.
“Moving is expensive and many tenants do so having just paid a new deposit of over £1,000 while waiting for their previous lump sum to be returned, leaving them struggling,” he said.
“Our FCA-regulated product is helping to solve these kinds of affordability problems faced by tenants everyday, providing the financial breathing space they need and allowing them to get on with their moves. Equally, we’re ensuring landlords are protected by offering eight weeks of cover – 60% more than the cash schemes.”
Mr Grech explained that as interest rates had risen to around 5%, tenants had become more keen to hang on to their lump sum and opt for a deposit alternative.
He said: “Instead of locking away their money in a cash scheme, tenants can earn interest and make their money work for them – a trend reflected in our survey results. It is a concerning misconception that cash deposits are ‘free’.”
Using Reposit, tenants pay one week’s rent as a non-refundable fee instead of the usual five. Importantly, the tenant remains liable for any damage at the end of the tenancy, with any disputes resolved through an independent resolution service within 14 days.
