Nationwide invests in unique rent-to-ow fintech

Nationwide has invested in a rent-to-own start-up which helps first-time buyers who don’t have access to typical mortgages get a home by saving part of their rent to build the deposit.

The investment in Kettel Homes is part of the UK’s largest building society’s drive to help members with the cost of living crisis by addressing the challenges people face when they are living in financial hardship. Nationwide has put £2.5m into an incubator specifically designed to encourage and improve innovative platforms such as Kettel Homes by bringing together start-ups with innovators, organizations and charities.

With a minimum deposit of two percent, Kettel partners with clients to buy the home they want to own and rent it back to them at market rates while saving the deposit, building credit scores and improving affordability. It works with institutional property investors to buy the properties, which are detached homes bought for £125k – £400k outside London, and then uses its platform to manage the whole process.

By fixing rent, savings and future purchase price from the outset, Kettel sets a road map for first-time buyers to achieve their goal of home ownership within 36 months – ensuring that 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 loan when they move from renting to owning. If the customer decides not to buy, they still get to keep the savings earned minus a relisting fee. The customer has the option of renting the property.

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

It launched exclusively for first-time buyers in Birmingham, Coventry, Leicester and surrounding areas, with first home purchases already 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 launched in 2018. It is run in partnership with the Fair by Design Fund (FBD), managed by Ascension Ventures – a fund dedicated to ending the poverty premium. Kettel has also benefited from further 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 mutual, we believe in the power of collaboration and that we can achieve more together than we can alone. Our incubator brings together innovators, charities, organizations 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.

“The fact is that many individuals who are struggling financially have to pay more for the same goods and services. More needs to be done to make things fairer for those with the least means. But these are not easy problems to solve and require a truly collaborative effort to across sectors. By providing meaningful support alongside funding, we look to help transform the lives of those living in poverty by scaling long-term solutions to help tackle the challenges this presents.”

Trevor Stunden, CEO and co-founder, Kettel Homes, said: “Generational rent has become a requirement versus an option for most millennials and gen z. We aim to change that by using a blended model to give ambitious first-time buyers the structure they need to get their foot on the ladder. Our aim is to extend home ownership to people who could not otherwise access traditional home finance at the moment. The long-term benefits of home ownership for both the individual and society are clear and make for stronger families and communities.”

Emma Steele, partner, Ascension Ventures, said: “Working with Nationwide on the incubator is a fantastic way to prove how we’ve been able to reinforce the mission of the fund to tackle the poverty premium and support the best technology-based solutions in the space. An “active” relationship with the fund by means of an incubator led to several case studies of portfolio companies that strengthened and accelerated deployment by working with the national commercial teams far earlier than they would have done without the incubator partnership. The charity partners around the incubator also enabled the founders to dig deep into the development of an inclusive product design.”