Whether you are buying or renting property, it is likely that you will end up spending a lot of money up-front. When you purchase property, you have the deposit for the mortgage, you will have various fees and you may even have removal costs. Given the importance of the deposit, this is a huge expense and one that places prospective buyers under considerable pressure. However, renting property is also challenging and the issue of the deposit in the rental market is a major discussion point.
In fact, this is an issue that is being debated by MPs as there is set to be a cap placed on the level of deposit paid by tenants. There is a wide range of opinions on this topic with The Housing, Communities and Local Government Committee suggesting that the cap should be imposed at five weeks’ worth of rent. However, there is opposition to this amount with landlord groups stating that a six-week limit would be the preferred option.
Tenants in London could end up paying a lot of money for their deposit
It is well known that rental fees, like property prices, are high in London. According to the home.co.uk website, the average rent in London stands at £2,495 per calendar month, which amounts to £575.75 per week. The following figures outline how much a tenant would have to pay as a deposit going by the London average:
A four-week cap creates an average deposit of £2,303
A five-week cap creates an average deposit of £2,877.5
A six-week cap creates an average deposit of £3,454.50
A seven-week cap creates an average deposit of £4,030.25
Of course, it would be wrong to take the London average as a guideline if you are looking for a property in more affordable areas. In South East London, there are affordable rental options that will require a much more modest deposit. The SE24 postcode area covers the Herne Hill district, with Herne Hill, Tulse Hill and Dulwich. According to the home.co.uk website, the average rent for the SE24 postcode area stands at £1,876 per calendar month, which comes in at £432.92 per week, and the deposit figures would be:
A four-week cap creates an average deposit of £1,731.68
A five-week cap creates an average deposit of £2,164.60
A six-week cap creates an average deposit of £2,597.52
A seven-week cap creates an average deposit of £3,030.44
In the SE25 postcode area, representing South Norwood, the average rent per calendar month is even more affordable, coming in at £1,100, which equates to a weekly rent of £253.85. Breaking down into the deposit figures is as follows:
A four-week cap creates an average deposit of £1,015.40
A five-week cap creates an average deposit of £1,269.25
A six-week cap creates an average deposit of £1,523.10
A seven-week cap creates an average deposit of £1,776.95
While the deposit for an area like South Norwood is much more affordable than the London average, it is still important that each tenant determines what they can and cannot afford to pay. What one person or household deems to be acceptable when it comes to making payments may not be suitable for another person or family.
At Kilostate, we appreciate that landlords and tenants will have strong views on an acceptable deposit. We are here to provide you with as much guidance and support as possible and if you need any help, please get in touch.