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Landlords called out over £80m interest from rental deposits

Letting agents and landlords are benefitting from higher interest rates by reaping more than £80 million this year from billions of pounds’ worth of tenants’ deposits, it has been claimed.

The Tenancy Deposit Scheme (TDS) says that in March, there were 4.7 million rental deposits in protected schemes, with a total value of £4.9 billion.

Of these, 55% by value, or £2.7 billion, are held in insured schemes, according to TDS, and protected by one of three government-approved deposit schemes, but are ultimately held by the estate agent or landlord, who keeps the interest, reports The Telegraph. Typical rates on these schemes are around 3%.

TDS says this income is rising as rents increase and rental deposits get larger; in the year to March, the amount in tenant deposits swelled by 8%, or £374 million. In its Q3 trading update, London estate agent Foxtons reported a £1.3m year-on-year increase in the interest it earned on rental deposits.

Across England and Wales, the remaining 45% of rental deposits by value (£2.2 billion) are held in custodial schemes.

These are free to use because they are funded by the interest generated from the tenancy deposits held by the scheme, which retains any interest earned while it’s registered.

£16.6 million

However, providers must start paying interest to the tenant after rates pass a certain threshold and these schemes are currently paying tenants interest at a rate of 0.75%. Across the total held in these schemes, tenants will receive £16.6 million in interest.

Head of redress and ombudsman office at the Property Redress Scheme, Sean Hooker, tells LandlordZONE that with the high interest regime only a recent phenomenon, it hasn’t seen any complaints related to the issue.

Eddie Hooker (pictured), CEO of mydeposits and the Hamilton Fraser Group, says tenants have been given back interest at the end of their tenancy from money held in custodial schemes, since the summer.

"We have no influence over insured-backed schemes where landlords and agents hold onto the money," he tells LandlordZONE.

"But we're not talking huge amounts - on an average deposit of £800 it works out at a few pounds. A good landlord might give it back but most probably won't."

Read a full guide to the tenant deposit protection legislation


Eddie hooker