"We are an intermediary-based deposit lender - the idea is that we partner with potential buyers, and fund the deposit for them."
FR: Who are OnLadder?
One of the biggest issues that first-time buyers have long faced has been putting together a sufficient deposit.
We believe that there is a better way to support would-be homebuyers in getting the deposit they need in place, and that’s what we are hoping to achieve with OnLadder. We are an intermediary-based deposit lender - the idea is that we partner with potential buyers, and fund the deposit for them.
The money that we lend to top up the buyers’ deposit can then be repaid by making low monthly payments over the life of the loan, and using the equity in your home at remortgage or sale of the property to pay us back, reducing the need for buyers to pay out of pocket.
This is a personal issue for us. Both myself and my co-founder Sam Hatley are in our early 30s, and despite having successful careers, neither of us has managed to buy a home of our own. We are bringing fresh eyes to a problem that’s been around for far too long, and built the sort of product that we would use ourselves in order to get onto the housing ladder. If we know that it would work for us, then that’s a good sign that it could benefit other hopeful homeowners too.
FR: What specific issues face first-time buyers today?
The difficulties that first-time buyers face in saving the deposit they need is nothing new, but it’s a problem that has undoubtedly gotten worse.
The rate at which house prices have increased in recent years has been extraordinary - a potential buyer might have put together what would amount to a 10% deposit, but then within a matter of weeks it could be insufficient due to further house price increases. If you aren’t lucky enough to have loved ones who are in a position to support your deposit saving, then it’s incredibly tough to save a decent-sized pot.
And because of those difficulties, it’s taking first-time buyers ages to finally get the money together that they need—a study from Barclays this year suggested it takes the typical new homeowner eight years to get a sufficient deposit in place, which is far too long.
What’s more, it looks as if the situation will worsen. Help to Buy is closing this year, which has been a valuable way for people to buy a home with only a 5% deposit, while the cost-of-living crisis has only intensified, making a deposit a distant dream for most first-time buyers.
FR: How are OnLadder seeking to solve this?
Clearly, first-time buyers need help building a deposit. We believe that OnLadder can do that in an innovative way.
We require only a 5% deposit from the homebuyer and then top up the rest so that they’ll have enough to purchase the home they need. Crucially, this can make a real difference to the size and cost of their first-charge mortgage—as brokers know, the difference in repayments can be striking between those buying with a 5% deposit and those buying with a 10% or 15% deposit.
The buyer can then make low monthly payments towards the OnLadder loan, with the bulk of the sum being paid off once it’s time to remortgage, or once they sell up. Given the housing shortage, we are unfortunately only more likely to see property prices increase still further in the years ahead. Thankfully, this will give our customers more options when it comes to clearing their OnLadder loan.
It works for mortgage lenders too: the loan-to-income and affordability stress tests can make it harder for them to take on high LTV lending, even for those with excellent borrowing prospects. However, if a borrower comes to them with an OnLadder deposit agreement, those issues are avoided.
FR: What feedback have you had so far from borrowers, brokers and lenders?
The response has been incredibly positive, and that’s so gratifying—we know that this proposition can serve a crucial role in the housing market, but it will only work if brokers and lenders understand and support it.
Brokers in particular have been very keen on the idea. There’s no one better placed to understand the difficulties potential buyers face in getting together a deposit, as well as the difference that the size of the deposit can make to the affordability of the mortgage.
The attitude of lenders has been really welcome too. We had one C-Suite executive tell us “I don’t know why we wouldn’t do this”, which is a ringing endorsement in my eyes.
As for borrowers, they recognise that OnLadder offers a solution to their deposit problems. Importantly, it also means they still own 100% of the property. Nobody starts the homebuying journey thinking they only want a portion of a property - they want to know that the entire home is theirs, and we can help them achieve that.
FR: What can we expect from OnLadder for the rest of 2022?
It’s been an exciting and productive year for OnLadder already, but there is lots more work to do. The first task is to finalise the lending partners we will be going to market with when the proposition officially launches.
We also want to lay the groundwork for our next fundraise, so that we are well positioned to support many more first-time buyers.
As always, highlighting the issues first-time buyers face and promoting the solutions that can support them reach their dream of home ownership will be at the heart of everything we do.
