House prices have increased at an unprecedented rate in the UK: over 227% since the 1970s. At the same time, wages have remained stagnant, the cost of living and renting is on the rise, and lender criteria is stricter than ever before.
As a result, the average home in the UK today costs 9 times income, and yet lenders will only allow buyers to borrow between 4-5 times.
As has been widely publicised, this means that there are fewer first-time buyers than ever before and for many, homeownership has moved from an inevitability to an impossibility. In 2019, 71% of millennials expressed fear that they would never own a home in their lifetimes. And that’s before inflation hit, interest rates doubled and the Help to Buy scheme ended.
Unable to save a deposit or meet affordability requirements, young people today are stuck in ‘delayed adulthoods’ – living in the family home for longer, and delaying life’s traditional milestones while they wait to become financially stable. Indeed, Tembo data shows that 1⁄3 of 18-24-year olds are forced to delay big life events like having a child in favour of trying to get on the property ladder.
However, the affordability crisis is impacting a wider demographic than ever. Tembo has seen a rise in the following scenarios:
- A cohort of owners who bought in 2020-2021 when sub-2% interest rates & low deposit mortgages were accessible, who now have little equity in their home and face interest rates that have more than doubled.
- Those going through divorces or break-ups, where a single income is insufficient to support the mortgage alone.
- Second steppers, looking to move from their starter home, but unable to afford a property that meets their needs.
- Older people who are either retired or close to retirement, struggling to understand what options there are for them to borrow into retirement (often because they are on soon to lapse interest-only deals).
Despite this bleak picture, there are more ways to boost mortgage affordability than ever before.
Housing developers, new lenders, institutional lenders, private providers and housing associations have all come up with novel solutions to the affordability crisis. The problem is – people don’t know about them. Most calculators & intermediaries provide users with a calculation of between 4 to 4.5x income, but that is no longer an accurate representation of what’s available on the market.
The most common routes to taking out a mortgage both present problems:
- If a borrower were to go it alone – A consumer going direct could spend hours researching various products and eligibility criteria, and it is very unlikely that they would find the fullest range of solutions or be able to compare them adequately.
- If a borrower were to use a traditional intermediary – Intermediaries have been unable to grapple with the growing number of buying schemes on the market. Eligibility criteria is complex, and for many schemes, they don’t appear on traditional sourcing platforms, meaning a broker would need to qualify a buyer for each scheme individually – a process that could take hours, or even days. For others, the time it takes to find a solution for a buyer failing affordability (and the risk of no solution being found), mean that customers are turned away prematurely – before all avenues are explored.
Enter Tembo, the digital broker helping buyers to discover their true buying budget
The Tembo homebuyer platform aggregates eligibility criteria from over 15 specialist schemes and 100 lenders to provide a buyer with the most accurate real-time view of their mortgage affordability and discover their true buying budget.
Schemes are divided into 4 categories:
- On your own – Boost your buying budget without a loved one’s help
- Guarantor – Boost your buying budget with the help of family or friends
- Family remortgage – Build a house deposit using a loved one’s existing property
- Part buy, part rent – Buy a share of a home and pay rent on the rest
Through its platform, Tembo increases buying budgets by an average £82,000 (or 30%). Vitally, it provides a solution for those would-be buyers and homeowners who are currently underserved: over 80% of its customer base had previously been turned down by a broker or lender.
Aggregating family assets to make homeownership happen
The Bank of Mum and Dad has typically been seen as only being available to the wealthy, whose parents can support their purchase by gifting a large cash deposit. The extensive range of family support schemes Tembo promotes through its technology democratises access to homeownership and enables family members to support a purchase through their income, pension, property or savings.
Providing solutions for buyers with no deposit saved
Saving a house deposit remains one of the largest obstacles for many first-time buyers, particularly in areas like London and the South where house prices can push a minimum 5% deposit upward of £50,000. Tembo’s schemes provide a number of solutions for aspiring buyers who are struggling to save. With a family member’s support, the buyer can use a Savings as Security mortgage or a Deposit Boost, whereby money is unlocked from the family property. Or if family support isn’t available, they can assess their eligibility for a brand new part buy part rent scheme.
Providing transparency in shared ownership qualifications
Previously, it wasn’t possible for a buyer to get an understanding of their borrowing potential with the government’s Shared Ownership without speaking to one of a small pool of ‘vetted’ brokers/intermediaries. Tembo has incorporated the different rental percentages for all housing associations offering Shared Ownership as well as the criteria required to give customers an accurate eligibility result and maximum budget in seconds. As a result, would-be users of the scheme can get a recommendation in minutes.
The company’s co-founders blew us away with their vision, relentless ambition and experience across both consumer and business finance and mortgages. Co-Founder and CEO Richard Dana previously spent 8+ years advising banks and funds on underperforming loans at EY, Co-Founder Eddie Ross was ex CPO of online mortgage broker Mojo Mortgages and Co-Founder and CTO Geoff Wright has amassed 10+ years experience building technology products at the likes of fashion retailer SilkFred.com, Video GP Appt start-up Babylon Health and StorIQ.
Tembo’s market is nascent and growing, with a market opportunity amounting to £1.3bn across first-time buyers and later life lending in the UK and £11bn in Europe and the US. The company has already seen fast traction in its two years post launch in 2021 from its direct-to-consumer proposition.
Concurrently, the start-up is hard at work growing a number of strategic partnerships with wealth managers, house builders and lenders including the likes of Barratt Homes and Aviva, in a move to further anchor its decisioning technology and materially change digital affordability for the better in the mortgage market.
We couldn’t be more excited to partner with Tembo on its journey to become the homebuyer platform for family-lending solutions and more – welcome aboard!