EXCLUSIVE: “Moving On…and Up” – Simon Groll and Jeremy Matallah, Keyzy in ‘The Fintech Magazine’
When Simon Groll and Jeremy Matallah both found themselves shut out of the property market, they came together to try to unlock home ownership for millions of renters in the same position – with Keyzy
Buying a home of your own has been a rite of passage for generations of Brits. Notwithstanding the eye-watering housing crash of the early 90s and another severe correction following the financial crisis in 2008, ‘climbing onto the property ladder’ is a dream kept alive by millions of young people. And many more have achieved it. According to the most recent Halifax First-Time Buyer Review, the numbers more than doubled between 2009 and 2021, when just over 409,000 heaved themselves onto that first ‘rung’.
While that hasn’t altered first-time buyers’ overall percentage share of the home loans market, which remains at roughly half, what did change was how long they’d taken to get there.
In London, where property prices have been historically higher than in the rest of the country and mortgages therefore harder to come by, you’re now likely to be well over 34 before you get the keys to the door; elsewhere in the UK it’s 32.
“In France, most of my friends had bought a house by the time they were 27, thanks to the 100 per cent loan-to-value (LTV) mortgages that banks were extending until very recently,” says Jeremy Matallah, co-founder of startup Keyzy, which plugs into open banking this summer to offer first-time buyers in the UK a fast-track alternative. He was looking for a place to rent precisely because he couldn’t get a mortgage in London when he met his now business partner Simon Groll, who was on a fruitless search for an affordable place to buy.“We both had decent income as well as savings but could not buy a property, even though we could afford to rent,” explains Groll.
And there’s the rub. You may be able to reliably fork out more for your landlord than for a mortgage repayment, but under lenders’ current criteria that has very little, if any, bearing on what you can borrow. And, while lockdown allowed a brief period in which young people could quickly build up some reserves to reduce the LTV of a purchase and swing the metrics more in their favour in 2021, that window has now closed.
According to Halifax, the average first-time buyer put down a £53,935 deposit on a property costing £264,140 last year, while the Office for National Statistics says full-time employees typically spent the equivalent of 9.1 times their earnings on buying a house – which was up from 7.9 in 2020. Many would-be home owners probably feel they’re running down a tunnel with no light at the end of it in 2022. With wage rises running at around five percentage points below inflation in the first quarter of 2022, the average house price on Rightmove spiralling beyond £350,000 for the first time, and rents rising at record rates across the country, eroding the opportunity to save, the pressures on them are compounding.
So, this was the combination of first-time buyer challenges that Keyzy set out to solve. It couldn’t get to the nub of the problem – which Matallah blames on a ‘chronic under-supply of new properties’ – but it could radically rethink the home-buying process and the way home financing is made available.‘Radical’ isn’t a word that sits well in an established financial and legal process like property transactions, but the product they proposed had been structured by a leading specialist law firm and investors were already underwriting it.
So, Matallah put in the miles, meeting the intermediary network of estate agents, brokers and others necessary to deliver and scale Keyzy’s vision.“I’ve been in real estate for many years and it’s still very old-school,” he says. “A lot of business happens face to face. So, I got on the road with our senior business development manager David Venn to explain the product. The meetings always started with a bit of scepticism on their part; the biggest issue they had was that it seems to be too good to be true!” ‘It’ is one of many tech solutions to real-world problems that demonstrate the potential of open finance – linking a network of financial and non-financial providers to deliver a service that cracks a nut for the customer, and all made possible by digitally secure access to financial information.
In this case, it allows Keyzy to buy a property of the customer’s choice and rent it back to them for a period of three- to seven years, until they are in a position to take on the debt through a lender. The purchase budget is decided by Keyzy’s affordability calculator. Not surprisingly, wannabe homeowners have been desperate to join the waiting list. “We acquire the property on your behalf and put it on a long-term lease. You pay us a fixed monthly amount, which is in line with market rents, and up to 25 per cent of your rent payments go towards reducing the eventual price you pay,” explains Matallah. “The important thing is that you lock in the price of the property for that period.
So, say the purchase was £210,000, including costs, you have the option to buy that property from us at £210,000, no matter what happens to the real estate price. You are building up your equity, while guaranteeing that you are not going to be caught up in a vicious circle of never being able to save enough.”In the current bull market, where house prices have risen 20 per cent since 2020, that sounds like a no-brainer. The customer can walk away from the deal at any point if they find a buyer for the property, and they get their savings back plus any potential increase in the property’s value. At the end of the period, Keyzy supports their application for a mortgage with payment records – and the savings for a deposit.
The product, which will be available initially in England and Wales, provides an alternative to government-backed Help To Buy schemes, which are subject to limitations, and, importantly, it’s not a shared ownership solution to the affordability problem – the latter of which has been associated with unfair costs. As to the tech: “We’re using open banking to give us detailed information to understand affordability,” says Groll. “Applicants can get a budget in principle in 90 seconds over the platform. Then we have the more comprehensive application, which they can complete in their own time and come back to online. We review their application in 24 hours, complete the customer underwriting piece and stress tests to ensure they can meet the rental payments, and, if they’ve made an offer, complete the property underwriting, too.
“We are effectively cash buyers, so we are competitive buyers. And we know the professional side of the house-buying process, so we can close the deal much faster with all the intermediaries going through a single platform.“It brings a lot of confidence to everyone in the process,” adds Matallah, “because the distortion of the current system leads to a historically high number of transactions falling through due to restrictive deposit requirements from mortgage providers.”
Mortgage interest rates have tripled in 2022, with some agents forecasting a house price slowdown as real wages fall. Others are not so sure. Prices for those renting in London – who’d be close to retirement by the time they’d saved a sufficient deposit in some boroughs – would, in any case be unlikely to fall back to more affordable levels any time soon. As proptechs go, Keyzy’s vision is ambitious. But it just might open the door to something very big indeed.