Nationwide has backed the UK’s first rent-to-buy program aimed at helping first-time buyers move into their dream homes without having to save a deposit or sort out their credit.
The idea is the brainchild of Kettel Homes, a technical property company based in London that describes themselves as a “tech-enabled rent-to-own platform that supports first-time buyers achieve the dream of homeownership.”
The most recent English Housing Survey found that young people between the ages of 25-34 have seen a 25% decline in homeownership rates compared to 20 years earlier, even though 48% of first-time buyers say homeownership is more important as a result of the pandemic.
But what does this mean for the future of home ownership? Will other companies follow suit?
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How Will The Scheme Work?
Through the scheme, would be home-buyers would be able to purchase their home, Kettel will then rent the property back to the owners at the market rate and after 36 months they will have been able to save a deposit, build their credibility and expand their affordability.
If during this time, the renters decide that homeownership is not for them, then they can walk away and the property will be absorbed into Kettels PRS portfolio.
By fixing rent, savings, and future purchase prices from the very start, Kettel hopes to help their renters to achieve homeownership within 36 months.
Kettel has launched the initial cohort exclusively for first-time buyers in Birmingham, Coventry, Leicester, and surrounding areas, with their first home purchases underway. Kettel wants to expand the scheme to cities across the Midlands and North over the next 24 months. Similar projects such as Divvy Homes, Landis, and Home Partners of America have proven popular in the US.
Nationwide has invested in Kettel Homes as part of the company’s incubator program, aiming to create solutions to address the property premium and the wider challenges faced by those struggling financially.
Who Are Kettel Homes?
Kettel Homes are based in London and hail themselves as a flexible alternative to the government equity loan option. Whereas to qualify for the government loan you must have a deposit of 5%, to qualify for Kettel you only need a deposit of 2%.
The planned extension is aiming to be rolled out in time for next year, coinciding with the ending of the government’s help-to-buy equity loan program, which is scheduled to end in March 2023.
The company was formed by founders Trevor Studen, Milan Pavlovic, and Alex Tupper as an answer to the increasingly difficult circumstances that first-time buyers found themselves in.
Kettel Homes was responsible for 47% of all transactions in 2021 based on data from the Land Registry.
What Does It Mean For The Future Of Home Ownership?
Chief executive and co-founder at Kettel Homes, Trevor Stunden, said: “Generation Rent has become a requirement versus an option for most Millennials and Gen Zs. We are setting out to change that by using a blended model to help give aspirational first-time buyers the structure they need to get their foot on the ladder.”
He went on to say that “Our goal is to expand homeownership to people who couldn’t otherwise get access to traditional home financing at the moment. The long-term social and financial benefits of homeownership for both the individual and society are clearer, making for stronger families and communities.”
We spoke to Karl McArdle and Jonathan Christie, Co-CEOs of The Property Buying company about what they thought this means for the future of homeownership.
Karl McArdle commented “Giving Gen Z the opportunity to get on the property ladder is a fantastic thing to do. Unless you have got very wealthy parents it is pretty safe to say that the younger generation have got a slim chance to be able save the right amount of money to be able to get into the property market. Especially when you factor in how buoyant the house market has been.”
He went onto say that “The challenge is that young people face to get into homeownership has become even greater. Giving people the chance to be able to rent for that 3 year period then having to find just a 2% deposit will be a huge help to struggling homeowners. I think is a fantastic idea and I think it really gives the younger generation a fighting chance to be able to get onto the property ladder during these uncertain times.”
Jonathan Christie told us “Whilst this is not a new concept, it is the first time I have seen a scheme like this backed by a big bank or building society. I think it is a great way for first time buyers to get on the property ladder in an area and in a home that they wish to purchase by renting it first.”
He continued “This will help to negate the risk of being priced out of the market by having a fixed purchase price at the end of the agreement. Whether this would still apply in a declining market is yet to be seen as the only downfall could be if prices were to fall would the original price still be applicable. All in all though, it is a great scheme for the property market.”
This covers everything you need to know about the UK’s first rent-to-own scheme. If you have any questions, queries, or insight into the matter, please feel free to get in touch!