New Digital Mortgage Firm Targets First-time Buyer Affordability Crisis
Digital home finance startup StrideUp is targeting the UK’s first-time buyer affordability crisis with a new mortgage plan offering up to six and a half times income to frustrated would-be homeowners.
Industry data* shows average first-time buyer deposits have soared 16% in two years to £53,935 while record inflation at 9% and the cost-of-living squeeze is forcing buyers to save for longer or give up. Rising house prices have outstripped incomes, meaning the average price to earnings ratio for first time buyers is 6.9x, which is significantly above the financing attainable under a traditional mortgage*. Affordability has fallen in all local authority regions of the UK bar three over the past 10 years.
StrideUp, previously backed by Picus Capital, has completed a significant funding deal for up to £280m, and a strategic partnership with specialist real estate debt investment manager, ARA Venn, to help first-time buyers beat the deposit trap with a new shared ownership mortgage product. Would-be homeowners only need a 10% deposit to buy in partnership with StrideUp and make one monthly payment covering repayments and rent, which enables them to effectively borrow six and a half times their income in comparison with most lenders who restrict buyers to four and a half times. They can buy up to 80% of their new home including the deposit and rent the remainder until they are ready to acquire more (in increments of their choosing). The value of the remaining 20% is frozen at the purchase price, enabling them to buy the rest at the same price even if house prices rise. However, on the 20% share, any losses from house price falls are shared with StrideUp.
StrideUp’s digital platform ensures the buying process is seamless for a product that it believes can replace the Government’s Help to Buy Equity Loan scheme, which closes to new applications on October 31st this year. While the Help to Buy scheme was only available on new-build properties, StrideUp’s product can also be used to buy second-hand homes.
Sakeeb Zaman, Co-founder and CEO of StrideUp comments: “StrideUp’s mission is to build a more affordable and accessible way for first-time buyers to get on the housing ladder and that has never been more relevant. With surging house prices and constraints on traditional mortgage lending, deposits are often falling short, and at the same time people are spending more on rent and living costs. With this new funding deal, StrideUp is uniquely positioned to offer a genuine alternative. We’re excited to be partnering with investors who share our vision of building a fairer and more accessible housing market.”
Rohan Trivedi, Co-founder of StrideUp comments: “We are excited to bring an innovative, scalable product to market solving a hard real-world problem for an entire generation that is priced out of home ownership. We believe this funding is an early step in making a material dent in the challenges facing first time buyers realise their aspirations.”
Gary McKenzie-Smith, Managing Partner, ARA Venn adds: “Help to Buy has made a major contribution to the FTB market but it is ending and the StrideUp plan is a genuine replacement that’s much less restrictive and more flexible for buyers. We look forward to working with the company and growing their business.”