ARA Venn, an investment manager specializing in residential private debt, has raised up to £280m to invest in property finance schemes to be launched by StrideUp, a property finance group digital which is co-owned by ARA Venn.
Over the past decade house price growth has outpaced income growth, meaning the average house price to income ratio for first-time buyers in the UK now stands at 6.9.. However, the vast majority of traditional mortgages are capped by regulation at a loan to income ratio of 4.5, putting home ownership out of reach for large swaths of the market. The StrideUp product solves this problem by providing financing at a loan to income ratio of up to 6.5, subject to careful affordability testing.
This significant mandate to invest funds managed by ARA Venn will enable StrideUp to roll out this product to approximately 1,000 clients and is intended to be the first of a series of mandates in this important and broad segment of the market.
With the StrideUp product, buyers with a 10% down payment can purchase up to 80% of their new home in partnership with StrideUp, and rent the remaining 20% from StrideUp until they are ready to purchase more. (in increments of their choosing).
The value of the remaining share is frozen at the original purchase price, allowing them to buy it at the same price even when property prices rise, ensuring that they benefit fully from any increase in value of their property . On the other hand, any loss on this share due to falling house prices is shared with StrideUp.
The StrideUp product therefore offers first-time buyers a strong credit history with financing at levels consistent with today’s price-to-income ratios as well as a clear path to full ownership at current house prices, meeting as well as the challenges presented by both the mortgage and rental markets and providing social benefits within the framework of ARA Venn’s ESG strategies. The product will be available on the existing housing stock as well as on new constructions.
StrideUp has developed a digital platform covering the end-to-end buying process. Getting a mortgage is often a stressful and confusing experience for first-time buyers. By investing in its technology and creating automated solutions for its onboarding, application and approval processes, StrideUp hopes to significantly speed up and simplify the process for its customers.
The product builds on elements of the UK government’s successful Help to Buy Equity Loan programme, which has supported the purchase of over 350,000 homes with loans worth £22 billion since 20132. The moment of its launch is highly relevant given the government’s recently announced plans to close this scheme to new claims on October 31 this year.
ARA Venn manages funds for a wide range of government entities, global institutions and private investors. Among other private debt strategies, the company also offers the UK Government’s £3 billion Affordable Housing Guarantee Scheme to provide cost-effective long-term financing to registered providers of affordable housing.
Gary McKenzie-Smith, Managing Partner, ARA Venn, said: “The UK first-time buyer market has long been crying out for new solutions. The situation has been exacerbated by the pandemic as house prices have continued to rise and people want more space while the traditional mortgage market has not changed.
“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 empower many customers who are effectively market-excluded and deliver the benefits of home ownership. to families, communities and society at large.
Sakeeb Zaman, Co-Founder and CEO of StrideUp commented, “StrideUp’s mission is to create a more affordable and accessible way for first-time buyers to climb the housing ladder and it’s never been more relevant. With soaring property prices and constraints on traditional mortgages, deposits are often insufficient and at the same time people are spending more on rent and living expenses. With this new financing contract, StrideUp is particularly well placed to offer a real alternative. We are delighted to partner with investors who share our vision of building a fairer and more accessible housing market.