In an interview with Mortgage Solutions, co-founder and chief executive Vadim Toader (pictured) said 2021 had been a “transformational year” as it secured institutional debt funding of £100m in debt and equity which will allow the lender to help people buy £1bn worth of homes.
He said the team had gone from 12 employees to 45 over the last 12 months and increased its customer base from 60 to over 200 in the same time period.
The average loan amount had also gone up from £50,000 to £75,000 in 12 months.
Toader said due to the three to six month lag time on leads, this was just the start of the uptick and more business would come through.
Toader added that “biggest roadblock for customers” in securing a mortgage was the five per cent deposit, adding it was an arbitrary figure and asked why it couldn’t be one per cent or seven per cent.
He said the lender was raising funding for new products, which would offer increased flexibility.
Looking forward, Toader said the firm would be highlighting its customer stories with testimonials to prove its product. He added that it had launched a referral competition for brokers and old and new customers where if you refer people, they could get up to £50,000 of their loan paid off or a new loan for the same amount. If the loan is worth more than that they still continue to pay the balance.
Proportunity has also hired former head of media marketing from Currency Cloud, Sarah Aird-Mash, as its vice president of marketing to help build their presence and would be embarking on more PR in the coming year.
Toader said that he wanted to foster more relationships and partnerships with lenders, brokers and estate agents.
“I think these are key elements we’re trying to expand in our business, so we become more part of the ecosystem,” he explained.
The company is currently partnered with Halifax, Tipton and Kensington Mortgages, and it was looking to partner with estate agents next. He said Proportunity was going to select two or three estate agent partners and put half a million pounds behind them.
First-time buyer, second-steppers and people requiring a ‘boost’
Toader added that Proportunity was popular with first-time buyers, but it held appeal for other groups as well.
He explained: “It’s not for first-time buyers only, it is also second steppers and people…that require more of a boost, for instance most people in their early 30s, but also others who are potentially divorced so one of them wants them to keep the house.
“Generally, it’s people in their late 20s or early 30s, maybe 40s, who are at the point of starting a family have a good income, but do not have a Bank of Mum and Dad.”
Toader said the firm was also receiving a lot of interest from referrals, and this was particularly the case during the Covid-19 pandemic as it was “effectively the only solution other than Help to Buy for people who wanted to buy with five per cent deposit”.
Proportunity was founded in 2016 and provides shared equity loans up to £150,000, although Toader said it could be flexible on the maximum limit.
He said a typical customer would be just short of £300,000 without Proportunity, but the lender could increase that to around £370,000 to £400,000.
Toader said: “In today’s market, this means a 10 times increase in properties they can afford. Because below £300,000, if you’re trying to buy in London or in any kind of urban area, you’re looking at nine properties, if you ignore garages and houseboats. Well with this boost it, you can look at 120 properties.”
Help to Buy versus Proportunity
He continued that Help to Buy was limited as it was only available on new builds and had price restrictions.
Proportunity caters to all homes and has “common sense” restrictions, where it uses technology to calculate if the property is a good investment and will increase its equity, and to ensure the buyer doesn’t pay more than they should.
Other benefits of Proportunity are that a borrower can get onto the property ladder and build equity faster.
Toader explained that as the shared equity loan reduced the size of the deposit a borrower had to raise, the money that would have been used for deposit could be used to renovate and improve the house instead, which could improve its value if certain assets were added.
With the Help to Buy scheme slated to end in March 2023, lenders are debating what solutions will fill the gap.
The latest government figures show that 339,347 properties were purchased with an equity loan between 2013 and 2021, with a total value of equity loans pegged at £20.9bn, and value of properties under scheme totals £94.4bn.
Toader said Proportunity wanted to support the transition as much as possible and it wanted to become the “go-to solution”.
He said: “Everyone’s struggling towards other solutions, but to be brutally honest, there’s also a bit of paying lip service to coming up or partnering with a solution.”
He added: “I think there’s going to be some of these solutions where committees approve them and say we’re doing something when in reality it won’t be pressure tested and it won’t be customer proven. This is a hard business.
“You will see that they might fall flat on their face, and then I think they’ll scramble at the end to pick up whatever offering from the market is available. We’re already proven and we’re building to be able to support the whole ecosystem when Help to Buy goes away.”
Toader said he thought more solutions would come to the market but they would come from new players rather than incumbents as they had “more focused teams pushing boundaries”.
“We think that everyone’s trying different flavours. I think you need to take these propositions and look at them in the detail and understand if they’re beneficial or not for the customer. There’s different elements, there’s some rent to buy options, equity options,” he explained.
Technology to predict equity
He said Proportunity’s technology, which combines 150 factors, 50 related to property and 100 to micro-economic aspects, would show what the value of a property is going to be and then give it a ranking.
It would also allow people to see if a property is undervalued and which properties were growing very fast, and this could help eliminate barriers to borrowing.
He added that there was a “bug in the mortgage formula” as it does not adequately account for different equity risk in different homes.
Toader said getting sufficient historical data was challenging but that Proportunity was “trying to turn it into a science”.
He explained: “We’re really working to fix this because we can see the benefit from it and for us. A lot of customers redo these properties and then it’s great for them because they improve the equity, they build the property they exactly want and then afterwards they get to live in a nice area in a bigger home.”