Digital lender StrideUp is targeting first-time buyers with the launch of a shared ownership mortgage product that offers loans at up to six-and-a-half times income.
Customers will need a 10% deposit to buy in partnership with the firm, and then make a single monthly payment covering repayments and rent, which allows them to effectively borrow six-and-a-half times their income. The firm says most other lenders restrict loans in this market to four-and-a-half times income.
Homeowners can buy up to 80% of their new home, including the deposit and rent the rest, until they are ready to acquire more, in increments of their choosing, says the digital lender.
The firm adds the value of the remaining 20% is frozen at the purchase price, allowing customers to buy the rest at the same price even if house prices rise. However, any losses from house price falls on the remaining 20% are shared with the business.
The digital platform says its product can help replace the government’s Help to Buy Equity Loan scheme, which closes to new applications on 31 October. It adds that its product can be used to buy older properties, whereas the government loan scheme is restricted to new builds.
The move comes after StrideUp completed a funding deal for up to £280m with European real estate debt investment manager ARA Venn, which the platform says will help tackle “the UK’s FTB affordability crisis”.
FTB average deposits are £53,935, while affordability has fallen in all local authority regions of the UK bar three over the past decade, according to the Halifax FTB Review 2021.
StrideUp co-founder and chief executive Sakeeb Zaman says: “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.”
ARA Venn managing partner Gary McKenzie-Smith 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.”
