25 Jul 2022

Nationwide invests in unique rent-to-own fintech to help first-time buyers during cost of living squeeze

  • Kettel Homes enables first-time buyers to live in the home they want to own while they build up their deposit, strengthen credit and increase affordability
  • Price of the property is locked in at the outset so tenants have a clear route to home ownership
  • Forms part of Nationwide’s efforts to create solutions for those in poverty by funding start-ups
  • Incubator Programme launched alongside a £2.5m investment in the Fair by Design fund

Nationwide has invested in a rent-to-own start-up helping first-time buyers unable to access typical mortgages get a home by saving a slice of their rent to build the deposit.

The investment in Kettel Homes forms part of Britain’s biggest building society’s efforts to help its members with the cost-of-living crisis by addressing the challenges people face when living in financial difficulty. Nationwide has put £2.5 million into an incubator specifically designed to encourage and enhance innovative platforms such as Kettel Homes by bringing together start-up businesses with innovators, organisations and charities.

With a minimum deposit of two per cent, Kettel works with customers to purchase the home they want to own and rent it back to them at market rates while they save their deposit, build their credit score and enhance their affordability. It works with institutional property investors to purchase the properties, which are single-family homes bought for £125k - £400k outside of London, and then uses its platform to manage the entire process.

By fixing their rent, savings and future purchase price from the beginning, Kettel sets out a roadmap for first-time buyers to achieve their goal of homeownership within 36 months – ensuring the price of the property does not increase over time. Those using the service are asked to save a 10 per cent deposit and will be given a standard repayment mortgage as they transition from renting to owning. If the customer decides not to purchase, they still get to keep their accrued savings minus a relisting fee. The customer has the option stay on renting the property.

Kettel also helps future homeowners with financial literacy tools, reporting their rental payments to build their credit and navigate government incentives for first-time buyers.

It launched exclusively for first-time buyers in Birmingham, Coventry, Leicester and surrounding areas, with the first home purchases underway, and is expanding to other cities across the Midlands and North over the next 24 months.

Nationwide’s Incubator builds on the success of the Society’s Open Banking for Good Challenge which launched in 2018. It is being run in partnership with Fair by Design Fund (FBD), which is managed by Ascension Ventures - a fund dedicated to ending the poverty premium. Kettel has also benefitted from additional investment from the Fair by Design Fund to help it expand its offering.

Claire Tracey, Chief Strategy and Sustainability Officer, Nationwide Building Society, said: “As a mutual, we believe in the power of collaboration and that we can achieve more together than we can alone. Our Incubator is bringing together innovators, charities, organisations and experts to help tackle the effects of poverty. It is more important than ever that we act now, given the rising cost of living.

“Many people are struggling right now to save enough to buy their own homes. More needs to be done to make home ownership possible. Through providing both meaningful support and funding, we want to transform the lives of potential first-time buyers and tackle the affordability challenges they face.”

Trevor Stunden, CEO & Co-founder, Kettel Homes, said: “Generation rent has become a requirement versus an option for most millennials and gen z.  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.  Our goal is to expand homeownership to people who couldn’t otherwise get access to traditional home financing at the moment.  The long-term benefits of homeownership for both the individual and society are clear and makes for stronger families and communities.”

Emma Steele, Partner, Ascension Ventures, said: "Working with Nationwide on the incubator is a fantastic way of evidencing how we have been able to amplify the mission of the fund to tackle the poverty premium and support the best tech-based solutions in the space. An ‘active’ relationship with the fund by way of an incubator led to multiple case studies of portfolio companies amplifying and accelerating their distribution by partnering with the Nationwide commercial teams way earlier than they would have without the incubator partnership. The charity partners around the incubator also enabled the founders to really dig deep on developing an inclusive product design."

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Notes to editors

Nationwide Incubator: Nationwide launched the Incubator in July 2021, with several businesses from the programme including Kettel Homes now in the final Build stage. The Incubator focuses on six main themes: Affordable credit, What happens if you’re declined credit, Housing, Fair access to essential goods and services, Income smoothing, and Wider implications of a poor credit score.

To help support the poorest in society, Nationwide invested £2.5 million in the Fair By Design (FBD) Fund, a venture fund managed by Ascension Ventures providing capital to help grow businesses that make markets fairer.

The Nationwide Incubator, in partnership with Fair by Design, helps address the challenges faced by people who are struggling financially.

Fair By Design: Fair By Design was conceived by the Joseph Rowntree Foundation (JRF) and Big Society Capital. Its policy and advocacy work is run by the Barrow Cadbury Trust on behalf of a group of foundations and the Venture Fund is managed by Ascension.

It’s dedicated to ending the Poverty Premium. FBD collaborates with regulators, government, and businesses to design out the poverty premium. Read the three-year strategy here. The Venture Fund managed by Ascension provides capital to help grow innovative ventures that are developing products to make markets fairer. By working in this way, new products and services can be created that address the poverty premium.

How the Incubator works: The Nationwide Incubator is divided into two parts: Explore and Build. The start-up businesses all receive a £15,000 investment from Nationwide for the first three months. The money will be used to investigate the challenge with experts, ideating around the problems and creating and testing the solution.

If the start-ups make it through the Explore phase, they will receive an additional £30k in funding from Nationwide and spend six months in Build. Fair by Design will work with the start-ups to help secure additional investment needed to scale the solution. Within Build they will also have access to workshops to create a sustainable and successful business.

Of the seven organisations that completed the initial Explore phase, Nationwide and Fair By Design have taken the following four through to the subsequent Build phase, an additional six months in the incubator to build and scale their solutions.

  • com: a digital platform that combines money management with financial skills development and goal setting.
  • co.uk: the UK's first social lending marketplace on a mission to make credit history, history.
  • Pocket-Power.co.uk: a phone-based switching service that targets digitally excluded low-income households who struggle to use existing digital solutions.
  • co.uk: simple, affordable and fair contents insurance for tenants.

Visit www.nationwideincubator.co.uk for further information.