Wayhome has begun buying properties through what it calls a “gradual home ownership” model using £500m of funding secured from pension providers.

The scheme is an alternative to traditional shared ownership, but it allows buyers to purchase homes with a 5% deposit and it is not restricted to ownnew builds.

Wayhome says the scheme enables buyers to afford homes that are worth six to eight times their household income and to increase their share at any time, without paying arrangement fees, in increments of as little as £50.

The scheme is available in a wide range of locations around the UK and the first buyers are set to move into their homes in September this year.

After the buyer puts down their deposit, Wayhome buys the home in full, in cash by partnering with institutional investors. 

Buyers don’t need a mortgage as they will rent the share of the home that they don’t own at the market rate.

Borrowers can “staircase up” by buying a maximum of 5% per year and a maximum stake of 40% in total. 

As borrowers don’t have a mortgage, they avoid the complications of having to alter their arrangements with the lender each time they want to increase their share. 

Buyers are encouraged to choose a home where the rental income is less than a third of their income to ensure that they can afford to increase their stake in the property over time. 

They must have a household income of at least £30,000.

These are usually priced between £200,000 and £500,000, are in good condition with no building work needed, have between two and five bedrooms with well sized rooms and are in desirable areas. 

It does not buy new builds.

Wayhome acts as the buyer and handles the whole purchase process, dealing with agents, conveyancers and surveyors, as well as carrying out due diligence to reduce the risk of the buyer overpaying or ending up with issues that are expensive to resolve. 

It says that so long as borrowers pay their rent and look after their property they will have security of tenure and will only need to sell when they choose to do so. 

Buyers are not subject to some of the restrictions that apply to certain rental properties, so they can decorate as they wish and keep pets.

Wayhome chief executive Nigel Purves says: “It’s a grim reality that homeownership is out of reach for millions of people in the UK. 

“Because lenders only offer loans based on low income multipliers, even those who have saved a significant deposit are often prevented from borrowing enough to buy the type of home that they can comfortably afford to rent.

“Our gradual homeownership scheme is a new route onto the housing ladder, one which satisfies our customers’ homeowning ambitions, while treating them fairly. 

“Gradual homeownership allows our customers to move into a bigger, better home. 

“But it also means they can stay as long as they choose, decorate, and still share the maintenance costs fairly with our funding partners.

“More than 40,000 people who’ve registered with Wayhome already are key workers. 

“We know how hard they’ve worked for us over the pandemic, yet so many of them can’t afford to buy a suitable home for themselves and their families. 

“We’re on a mission to help change this.

“This initial launch is the first step towards a new world of possibilities for reluctant renters. 

“There is so much more to come from us as we work to realise our mission of reinventing homeownership.”