Letting agents accused of cashing in as interest on deposits ‘rockets’

Rising interest rates mean estate agents are ‘raking in’ tens of millions from tenants’ deposits, according to reports.

The ‘passive income’ from interest on deposits could be worth more than £80 million this year, based on £4.9 billion held in protected deposit schemes.

Lucrative

There were 4.7 million deposits retained in the schemes in March this year, according to the Tenancy Deposit Scheme (TDS).

The Bank of England has held the base interest rate at 5.25%, but there was a series of rises up to that figure from just 0.1% two years ago. Now interest rates make deposits a more lucrative proposition for agents.

Protected

The TDS says 55% of deposits are protected by one of three government-approved deposit schemes. Rates on these schemes are currently around 3%, which would enable estate agents to collect around £81 million a year, the Daily Telegraph reports.

Toby Martin, lettings expert at the estate agent body Propertymark, told the Telegraph: “The holder of the deposit is entitled to keep any interest. The standard position across the sector is that the tenancy agreement contains the consent of the tenant to that situation.”

The other 45% of deposits by value (£2.2bn) are in ‘custodial’ schemes, where the deposit scheme itself holds the cash and earns the interest.

But the providers start paying interest to the tenant after rates pass a threshold, and they are currently paying interest at a rate of 0.75%.

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