A growing number of tenants in the build-to-rent (BTR) sector are using deposit alternative products as many opt to invest a lump sum instead of locking it away in a traditional cash scheme.

Reposit’s data shows that demand for its product in the sector has grown significantly in the last year, with sales up by 31% in 2024 compared with the previous year.

Contrary to the belief that these products are only for more risky clients, Reposit reports that it gained 243 new letting agency or BTR partners last year and has just signed a deal with Lomond Investment Management & Touchstone Corporate Property Services on behalf of the Lloyds Living portfolio, which has a rental portfolio of more than 5,000 homes across Britain.

Its deposit alternative product will be offered alongside a traditional cash deposit, with residents given the option of paying around one week’s rent - as a non-refundable fee - instead of five weeks’ rent upfront.

They remain fully liable for all damage and rental arrears at the end of the tenancy.

Deposit alternatives

Deposit alternatives are now recognised for the value they offer residents and operators, particularly in times of economic headwinds, explained chief executive Ben Grech.

He said: “Operators are also expanding the financial choices available for residents, as well as reducing their admin time spent processing traditional deposits.”

“For residents, the benefits of paying just one week’s rent is obvious - especially as the average cash deposit has now reached £1,245. With higher interest rates available at over 5%, many residents prefer to invest a lump sum to earn interest instead of locking it away in a traditional cash scheme.”

Grech adds that letting agents are offering deposit alternatives as landlords seek greater protection under the upcoming Renters’ Rights Bill, while agents look to minimise compliance risks.

“Solutions such as ours streamline administration processes, reduce legal risks, and provide landlords with extra security, all while offering agents a new and fully compliant revenue stream.”