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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