Mortgage fintech StrideUp completes £280 million funding deal
ARA Venn, a specialist investment manager of private debt in the residential sector, has completed a fund-raise of up to £280m to invest in home-finance plans to be originated by StrideUp, a digital mortgage fintech company that is co-owned by ARA Venn.
Over the past decade, house price growth has outstripped income growth, meaning that the average house price to income ratio for first-time buyers in the UK now stands at 6.91. However, the vast majority of traditional mortgage lending is capped by regulation at a loan to income ratio of 4.5, which puts home-ownership out of reach for huge swathes of the market. The StrideUp product addresses this problem by providing finance at a loan to income ratio of up to 6.5, subject to prudent affordability tests.
This significant investment mandate from funds managed by ARA Venn will enable StrideUp to roll-out this product to around 1,000 customers and is intended to be the first in a series of mandates in this important and large segment of the market.
With the StrideUp product, buyers with a 10% deposit can purchase up to 80% of their new home in partnership with StrideUp, and rent the remaining 20% share from StrideUp until they are ready to acquire more (in increments of their choosing).
The value of the remaining share is frozen at the initial purchase price, enabling them to buy it at the same price even as house prices rise, ensuring they receive the full benefit of any increase in value of their property. On the other hand, any losses on this share from house price falls are shared with StrideUp.
The StrideUp product therefore provides first-time buyers with a strong credit record with financing at levels that are in line with today’s price to income ratios as well as a clear pathway to full home-ownership at today’s house prices, thereby addressing the challenges presented by both the mortgage market and the rental market and delivering social benefits within ARA Venn’s ESG strategies. The product will be available on existing housing stock as well as new-build properties.
StrideUp has developed a digital platform covering the end to end buying process. Getting a mortgage is often both a stressful and confusing experience for first-time buyers; by investing in its technology, and building automated solutions for its onboarding, application and approval processes, StrideUp hopes to significantly speed up and simplify the process for its customers.
The product draws on elements of the UK Government’s successful Help to Buy Equity Loan scheme which has supported the purchase of over 350,000 homes with loans worth £22 billion since 20132.
The timing of its launch is highly relevant given the Government’s recently stated plans to close that scheme to new applications on October 31st this year.
ARA Venn manages funds for a diverse range of government entities, global institutions and private investors. Among other private debt strategies, the firm is also delivering the UK government’s £3 billion Affordable Homes Guarantee Scheme to provide cost-effective long-term financing to registered providers of affordable homes.
Gary McKenzie-Smith, Managing Partner, ARA Venn said, “The UK first-time buyer market has been crying out for new solutions for a long time. The situation has been exacerbated by the pandemic as house prices continued to grow and people want more space while the traditional mortgage market has failed to evolve.”
“We are delighted to have partnered with StrideUp and look forward to working with their dynamic team to deliver an innovative mortgage product that will enfranchise many customers who are effectively shut-out from the market and provide the attendant benefits of home-ownership to families, communities and wider society.”
Sakeeb Zaman, Co-founder and CEO of StrideUp commented, “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.”