One in five tenants borrow cash to pay for their deposit

One in five renters are taking out loans to help pay for their five-week cash deposit when moving into a new home, research reveals.

The findings from Reposit show that 6% of tenants have taken out £1,500 or more, while 18% secured sums between £1,000 and £1,500.

A further 24% accessed amounts ranging from £500 to £1,000.

The deposit alternative provider says the data highlights the growing financial pressures facing tenants.

Ability to pay a deposit

The firm’s chief executive, Ben Grech, said: “The broad assumption still exists within the industry that being able to pay a cash deposit is an indication of financial stability.

“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.”

He adds: “With rents and cash deposits at record highs, one in five tenants are now burdening themselves with repayable debt to cover their lump sum, which only adds to their financial strain.”

All ages borrow money

The research, which is based on responses from 1,000 current renters, shows the borrowing trend spans all age groups and regions, with the typical five-week deposit now averaging £1,218.

Despite cheaper monthly rents in northern areas compared to the south, tenants in the North East are disproportionately borrowing larger sums exceeding £1,500.

Here, the average agreed rent stands at £947 per month, translating to a deposit of roughly £1,184.

Similar patterns emerge in the West Midlands (£1,078), London (£2,772), and the East Midlands (£1,034).

Age plays a significant role too and renters aged 18-34 are the most frequent borrowers, while those aged 55-64 tend to seek larger loans, often between £1,000 and £1,500 or more – which might be down to higher rents.

Notably, women renters are borrowing greater amounts than men.

Tenant’s ability to pay

Mr Grech says that 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.

He said: “As the Renters’ Rights Bill edges closer, landlords are becoming more proactive in assessing tenants’ financial stability to mitigate the risk of rent arrears, potential evictions, and disputes.”

He added that more tenants are reassessing the true cost of traditional cash deposits with many now eager to benefit from higher interest rates, rather than having their money tied up for a long tenancy.