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Raising a tenancy deposit ‘more of a cash flow problem than an affordability issue’

Buy-to-let landlords generally recognise the importance of taking a deposit from a tenant and placing it in a government-backed tenancy deposit scheme as protection to ensure that any potential damage or unpaid rent at the end of the tenancy is covered. 

However, raising enough money for a deposit plus move-in costs, such as removals, can be a real challenge for many renters, who usually have to stump up the equivalent of a month or five weeks’ rent as a deposit.

According to research by Hamilton Fraser’s deposit alternative scheme Ome, the average tenant deposit cost now stands at £1,299, which for some renters is manageable, but the issue is the requirement to pay the full sum upfront, leading many to turn to family for a loan. 


But the company claims that other renters are being forced to borrow the money from a lender and stomach the additional interest on top of the deposit itself.

Ome looked at the additional costs of a credit card, personal loan and payday loan and found that the interest ranged between £44 to £2,794 depending on rate and credit score over a year long term.

Co-founder of Ome, Matthew Hooker, commented: “For many tenants, the financial hurdle of a deposit is more of a cash flow problem than an affordability issue and as a result, many are forced to borrow the money in order to secure a rental property.

“This only adds to the financial stress that renting can bring and with rents continuing to climb, not only are tenants paying a large sum to a landlord each month, but also to their lender with the addition of interest.

“This is particularly testing for those with a poor credit score who have no choice but to borrow with some very high interest rates and of course, should they borrow for a longer-term, they will also pay more in interest.”

Given the financial pressure on renters under the existing deposit system, with tenants sometimes having to wait weeks to get their deposit returned or having a battle to get charges or financial deductions removed, and not always successfully as deposit disputes don’t always go their way, there is, perhaps unsurprisingly, growing appetite for deposit-free renting. 

Consequently, Hamilton Fraser recently launched of its own in-house deposit alternative brand, Ome. 

The product, which is the latest to be launched by the letting and landlord insurance firm, operates independently but still benefits from the support and entire resources of the Hamilton Fraser Group, including its own adjudication service HF Resolution, which already provides services to many of the existing deposit alternatives.

The Hamilton Fraser Group insist that it will ensure that every tenant and landlord is aware of the pros and cons of deposit protection options, and how both an alternative or traditional deposit scheme might best suit their individual situation. 

Ome, which aims to address a number of market changes, including the introduction of the tenant fee ban and mandatory client money protection, has not been set-up to dissuade anyone from using the traditional format, but it provides landlords with the exact same financial protections that they would receive with a traditional deposit scheme.

Hooker added: “This large upfront obstacle in the way of a tenant deposit is one of the driving reasons we launched Ome in order to address the issue of cash flow for the UK.”

Cost of borrowing average deposit and payback over a year


Average representative rate - interest rate - APR

Amount to borrow (average deposit)

Loan term / period

Monthly cost

Overall cost (with interest) / amount repayable

Interest Paid


Credit card - Low rate



1 year




Average credit card rate

Credit card - Medium rate



1 year




Credit card - High rate



1 year




Payday loan - average rate



1 year




Payday loan rates

Personal loan - low rate (good credit score)



1 year




Personal loan rates

Personal loan - medium rate (average credit score)



1 year




Personal loan - high rate (poor credit score)



1 year




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    I appreciate the deposit can be a problem.
    But why is it a landlord problem !?
    Landlords are blamed for everything it seems !
    If landlords had better protection against damages and unpaid rent and were treated better by government then perhaps things could change.

  • icon

    Surely if a tenant can't find the deposit at the start of the tenancy then they're going to struggle to find the money to cover any damage at the end of the tenancy. This is especially true of the unemployed tenant.

  • icon

    Could not shelter lend them the money, after all they are supposed to be a charity for tenants and the homeless ?

    • 06 January 2020 16:46 PM

    Could Shelter afford the £9 billion in losses that tenants cause LL every year!!!??
    Apparently mostly caused by rent arrears.
    I'm afraid Shelter won't use their resources to fund tenants directly as they know tenants are feckless and would rapidly bankrupt Shelter.
    Far better for greedy LL..............is there any other type!!!!!!??? to suffer the £9 billion of annual losses!


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