Lifetime Deposits: Warning over complexity of government pledge

13 May 2021 | Renting

Lifetime Deposits: Warning over complexity of government pledge

The government’s pledge to introduce a lifetime deposits concept, theoretically making it easier and cheaper for tenants to move, has been given only a guarded welcome by a consumer website, Money.

It says that tenants have seen costs increase significantly in the past year, by 10 per cent to an average of £821 pcm since before the pandemic, according to Halifax. 

This is compared to an increase of mortgage costs by an average one per cent to £753 for those who own their own homes.

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On top of rising rents, one of the biggest problems facing renters is the size of the deposit they need to save in order to move. This is an average of £1,054, according to the Office for National Statistics, which has to be paid in advance before moving into a new home, and before the deposit from a previous property is released.

Therefore Money says a lifetime deposit concept appears popular, but it warns there may be problems with implementation. 

James Andrews, senior personal finance editor at the  website cautions: “At first glance, the new plan for tenants’ deposits to move with them from property to property looks like an all-out win – but the devil will be in the detail.

“The first point to make is that not all deposits are equal – which means there needs to be a simple way to add to the amount you have.

“The second is that not all moves are seamless – what happens when there’s a gap or, worse, an overlap between one rental contract ending and another beginning.

“And finally – while the tenancy deposit protection scheme means a landlord can’t withhold your money, it doesn’t mean they can’t make deductions for damage.

“If this is disputed, then that money is just as tied up as it would have been if you had to go out and find a new deposit for the next property as you do now.”

A government White Paper on the issue is scheduled for the autumn.

This post has originally been featured in Letting Agent Today.