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Hard up renters turning to payday lenders for deposits

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Hard up renters turning to payday lenders for deposits

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Published by Max Salsbury for 24dash.com in Housing and also in Communities, Finance

Hard up renters turning to payday lenders for deposits Hard up renters turning to payday lenders for deposits

Renters are being priced out of house and home by deposits that have soared by 50% since the financial crisis began, new data have shown.

Figures from the government-backed Deposit Protections Service have revealed that the average deposit for a rented property in the North East of England has jumped from £600 to £900 since 2007, while wages have climbed by only 13%.

And the steep hike means that 49% of renters in the region are having to borrow money to pay for their deposits, with many turning to payday lenders for the funds.

According to figures from Housing NOW, the monthly analysis of the North East property market by lettings firm KIS, renters could be left facing a £850 bill just to get the keys to a new property.

Much of the price rise has been blamed on landlords increasingly requiring deposits equivalent to six weeks' rent, rather than the traditional four.

KIS, which manages properties for 700 landlords across the North East, was the first letting agent to abolish deposits, replacing them with its 'let by cover' scheme.

Under the scheme, landlords sign up to an insurance policy which gives them guaranteed rent and legal assistance – including court and bailiffs fees.

KIS founder and managing director Ajay Jagota: “I completely get why landlords think that four weeks rent isn’t enough of a deposit to cover the cost of serious damage to their property – it invariably isn’t - but that’s a reason to ditch them, not double them.

“Hearing that half of renters have to borrow to pay deposits is alarming. It does nothing to nurture long-term tenancies to push people into debt, especially when they borrow from a payday lender. You can’t get a mortgage if you’ve got too much debt, so why are we demanding renters get into debt!

“Landlords are better off ditching deposits altogether, not just financially, but practically – I’m sure any landlord who has been through the agonising process of arbitration just to get access to compensation they are legally entitled too when bad tenants have left them out of pocket will tell you.

“We’ve seen three times as much interest in properties we manage since we launched let by cover as it makes it so much easier to find good tenants and so much easier to keep them.”

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