Why mortgage advisers are using fintech lenders

Why mortgage advisers are using fintech lenders
Fintech equity loan provider Proportunity landed £114mn funding in October

An increasing number of fintech lenders are entering the UK mortgage market hoping to ease the stretch many first-time buyers are now feeling in light of record house prices.

Proportunity, Generation Home and Even are just some of the names cropping up in brokers’ inboxes promising to help their younger clientele.

So, what do advisers think of these lenders, and why are they choosing their products over ones developed by pre-existing high street or specialist lenders? FTAdviser spoke to brokers to find out.

Josh Lillie, a mortgage, insurance and equity release adviser at Boon Brokers, advises on products developed by Proportunity, a startup which promises to increase a home buyer’s budget for a deposit by up to £150,000, or 25 per cent.

“In the last few years, fintech lenders have seen an opportunity. High street lenders are slower to adapt, because they’re so large they have all these processes,” Lillie explained.

“From an adviser’s point of view, it’s nice to be able to offer a fintech lender as an alternative. You’re seen to be more knowledgeable and it gives clients more options.

“More and more of them [fintech lenders] have been reaching out to us in the past year.”

According to Lillie, guarantor mortgages “aren’t really a thing anymore”, and while buyers can consider joint borrowing with mum or dad, the age disparity often upsets affordability.

“In London, fintech lenders are the only option for some first-time-buyers,” he said.

The equity loan is an extra monthly payment on top of the mortgage. On Proportunity’s website, it says with a 5 per cent deposit, a 25 per cent equity loan, and a 70 per cent loan-to-value mortgage on a £420,000 property, monthly payments would be £742 for the equity loan.

Lillie said for some, these monthly payments on top of the mortgage are not affordable, leading him to suggest fintech lenders could look at ways to reduce them.

For the broker, another bonus when using a lender like Proportunity is it will, unlike a high street bank, send them leads. Though Lillie clarified he is independent and not tied to them for the mortgage recommendations.

Ahauz and Even are similar to Proportunity, in that they offer borrowers a loan on top of their existing mortgage. Ahauz - which goes by the tagline ‘the bank of mum and dad’ - also lends up to £150,000, while Even goes up to a lesser £100,000.

Preparation ‘for something bigger’

In recent weeks, Proportunity launched Home Me, a new whole-of-market brokerage which is an appointed representative of IntraPrivate Finance, a 25-person brokerage run by adviser Bulent Kandemir.

This brokerage will focus on helping first-time buyers struggling to raise a deposit to get onto the property ladder. 

"What makes it [Proportunity] fintech is the algorithm, which was built by Oxford and MIT [Massachusetts Institute of Technology] graduates. It predicts what the property price will be,” said Kandemir.