The program lets buyers live in the home they want while building their deposit and credit
Kettel Homes has announced that it has been backed by Nationwide Building Society and the Fair by Design Fund to launch the UK’s first open market rent-to-own program for first-time buyers.
Kettel said its rent-to-own program provides institutional property investors access to existing stock in the underdeveloped single-family rentals market.
The company claims that its initial fixed three-year rental term provides a stable return, while enabling investors to build a long-term PRS portfolio with any properties that the customers decide not to purchase.
Kettel purchases existing freehold single-family homes from £125,000 to £400,000 outside of London, making up 47% of all transactions in 2021 based on Land Registry data.
For first time buyers, a minimum deposit of 2% is required to purchase the home they want to own. Kettel then rents it back to them at market rates while they save for a deposit, build their credit, and expand their affordability.
Kettel said that by fixing the client’s rent, savings and future purchase price from the beginning, there is certainty and a clear roadmap for first-time buyers to achieve their goal of homeownership within 36 months.
In preparation for owning, Kettel added that it will help its customers with financial literacy tools, reporting their rental payments to build credit and help navigate government incentives.
Kettel has now launched its initial cohort exclusively for first-time buyers in Birmingham, Coventry, Leicester and surrounding areas, with the first home purchases underway.
The company said it will be expanding to other cities across the Midlands and North over the next 24 months in an effort to address the increased demand for alternative financing options with the government’s help-to-buy equity loan program scheduled to end in March 2023.
Meanwhile, Nationwide’s investment in Kettel Homes forms part of the society’s Incubator Program, which hopes to create solutions to address the poverty premium and the wider challenges faced by those struggling financially.
The project is part of a larger investment led by the Fair by Design Fund, the venture fund managed by Ascension Ventures and backed by Big Society Capital and the Joseph Rowntree Foundation to drive the expansion to Kettel’s offering.
“Generation Rent has become a requirement versus an option for most Millennials and Gen Zs,” Trevor Stunden, chief executive and co-founder at Kettel Homes, said. “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 social and financial benefits of homeownership for both the individual and society are clear, making for stronger families and communities.”
Kettel Homes was formed by founders Stunden, Milan Pavlovic, and Alex Tupper based on hundreds of interviews with aspirational first-time buyers to address the increasing challenges they face to purchase a home. Similar platforms such as Divvy Homes, Landis, and Home Partners of America have grown quickly in the US. Kettel was initially founded with support from Entrepreneur First.
