Tembo, the digital broker backed by Aviva and Nationwide, has revealed plans to expand its offering beyond first-time buyers, eventually moving into care funding.
Set up in 2020, the company currently focuses on helping first-time buyers get on the property ladder with financial support from family and friends.
As the company edges towards the end of its second year in business, it has grown to a 22-person strong operation and has seen growth of 30 per cent month-on-month across its two main propositions.
Speaking to FTAdviser, Tembo co-founder and chief executive Richard Dana outlined how the company planned to support consumers beyond buying their first home in the future.
“All of our marketing and our proposition is based around first-time buyers, but what we're actually seeing is, that's probably only half our customers,” Dana said.
“About 30 per cent are people who are buying their second property. They might buy a one bedroom flat, and then they might have a kid. And then it's even harder to get onto the second rung. Even though they might have bought the property themselves the first time, the second one becomes even harder. So we've got lots of people on that second or third step.”
Tembo is also seeing a lot of people using its service who are going through separations and want to retain the family home but can’t afford to do it on their own.
Tembo’s products allow mortgage borrowers to ‘boost’ their income or deposit by enlisting help from family members or friends who have equity available in their property.
So for a person going through a separation who wants to keep their home but is not in a financial position to do so, Tembo offers a route forward by enabling family members to help.
It’s these sorts of conversations with clients that are encouraging Dana to explore pursuing care funding in later life.
Sandwich generation
“A lot of people in the 40s and 50s age group have dependents on both ends. In those conversations, we found a lot of people are having to provide an element of support to their parents or their older relatives,” Dana explained.
“Using these alternative later-life lending products is quite a nice way to release some capital from a family member's home to actually fund their care, and it's not quite as restricted as a lifetime mortgage product.
“There's a big growth in home care, as opposed to going into care homes. And this is a really good way to start funding that.”
So while Tembo's longer-term plan is to help more families use their wealth more effectively in all aspects of life, for now it remains focused on property.
Affordability
July was the company’s busiest month yet, partly because it is seeing more and more customers who have previously engaged with a mortgage broker or directly with a lender.
Dana explained: “As we're going into these economic uncertain times, we're already seeing signs that lenders are pulling back. The cost of living also makes the affordability calculations even tougher.”
“So affordability for people that might have been able to afford a property a year ago, is coming back.”
Indeed, yesterday (Sept 1) it was reported that mortgage affordability dropped to its lowest level for 2022.
Data from the latest Mortgage Broker Tools affordability index showed that the minimum average loan size offered by mortgage lenders fell to just over £136,000 in July, down from £150,000 in January.
The maximum average loan offered has also fallen slightly to £270,000 in July, down from just over £274,000 in June.
At the same time, UK private sector rents have risen at the fastest rate since 2016, according to official figures.
While data from the Office of National Statistics published earlier this month showed landlords charged an average 3.2 per cent more in the 12 months to July 2022.
All of this leads Dana to believe the gap of people that are going to be able to afford to buy a house is only going to get lower.
The government’s Help to Buy scheme was introduced to bridge the affordability gap, but a House of Lords report published earlier this year found the scheme had pushed up house prices in England and failed to “provide good value for money” for the taxpayer.
With the scheme set to end in October, Tembo has been working to build partnerships directly with house builders, some of whom will be losing 40 per cent of their revenue.
Tembo hopes to go live with some of these partnerships in the next six months as it broadens its distribution channel.
jane.matthews@ft.com
