A company called Boost is launching which plans to lend homebuyers part of a deposit and then share in the capital appreciation of the property.
For example, if a buyer has a deposit worth 10% of the purchase price Boost will lend an additional 10%, meaning the buyer is able to take out an 80% LTV mortgage.
Then the company will share in future appreciation of the home (typically 25%) instead of charging interest. If there is no appreciation or house prices drop then the amount borrowers need to pay back will stay flat.
Cassian Goode is co-founder, who was previously a lawyer specialising in real estate.
Goode said: “There is a squeezed middle in the UK where if you don’t have the parental support you aren’t able to buy.
“We want to help people buy what they want to buy, not what they are forced to buy.”
Boost is targeting existing homes rather than new builds, which are covered by the government’s Help to Buy equity loan scheme.
How high a proportion of the appreciation the firm will take depends on the region of the UK, as the company may take a smaller amount if historic data suggests prices are set to rapidly increase in the area. The firm may also give borrowers a better deal if they are deemed particularly safe.
The company was inspired by California-based firm Unison, which has a similar model in the US.
Boost is at the beginning of its journey, as it is going through the approval process with the Financial Conduct Authority.
The firm is in advanced talks with two mortgage lenders with a view to partnering up. The plan is for the company to be an agent with another principal lender.
Goode is targeting launching in early 2021, where the firm will focus its efforts on the housing markets in England and Wales.