Founded by Simon Groll and Jeremy Matallah, the firm acts as a cash buyer for the properties its customers want and then rents it back to them while allowing them to save a deposit.
Keyzy has just launched its proposition across the entire Connect for Intermediaries network, following a trial which began in April.
After buying a property, Keyzy charges tenants a monthly fee which covers a market-valued based rent, and a surcharge of up to an additional 25 per cent which gets converted into the eventual deposit of that same property. The firm locks in the value of a home from day one, including closing costs, which is the amount that the customer will pay when they are ready.
Speaking with Mortgage Solutions, Groll said he and Matallah “came up with a solution to help people move into a home and accelerate their path to homeownership” after they found that despite having good jobs and earning decent salaries, they could not afford to get onto the property ladder.
South African-born Groll started his career creating software for Allan Gray Proprietary. He also worked for Mckinsey and Company for five years where he focused on designing and building lending propositions for financial institutions. Matallah is from France, has experience in the real estate sector and previously worked for investment firms Blackstone Group and RoundShield Partners.
Groll said Keyzy’s proposition also allowed people to choose their forever homes from the outset.
“We actually want to solve the problem. It’s great that there are other options to get people into their first homes like equity loans and shared ownership but we don’t believe they solve the underlying cause.
“We aim to do this by allowing people to move in now, save while they rent, then buy later.”.
Keyzy’s criteria
The proposition is open to all kinds of borrowers with a minimum income of £30,000, although their income cannot predominantly come from benefits.
The firm will purchase new build, second hand and leasehold properties with a minimum of 100 years left on the lease. Studio apartments are restricted as the company does not consider them to be suitable forever homes.
The business is backed by venture capital which supports the building of its platform, as well as having other funding lines from financial institutions.
Income vs house price limitations
Having come from a professional background where he earned a decent salary, Groll said income multiples were the biggest barriers facing prospective homeowners, especially first-time buyers.
He said the 4.5x loan to income multiple was appropriate when it was introduced in 2014 and house prices were around 5.5 times the average income. However, now that values have risen to at least nine times a person’s income it “didn’t make sense”.
Groll also said the situation was made worse by the undersupply of homes, but with Keyzy acting as a cash buyer, the company had an advantage when making offers.
The company conducts an assessment with potential customers to calculate the maximum property value they can afford to purchase depending on their financial circumstances and ability to save. When the customer finds a home within that budget, a full affordability assessment is carried out along with underwriting and ID verification.
Groll said: “The idea is when they are mortgage ready, we encourage them to move on to a mortgage which will be within four or five years.” By that point, Keyzy predicts customers will have raised a deposit of around 10 per cent.
When customers are ready for a mortgage, they go to apply for one as normal.
Change in circumstances
Groll said if Keyzy was ever unable to secure the property a customer wanted, it would keep making offers on other desired properties within budget until a home was purchased. The firm does not make offers on homes which exceed the calculated customer budget.
In the event the customer no longer wants the property they have been renting through Keyzy, there is the option to sell the home and keep the proceeds depending on any appreciation in value.
Groll said: “They get the upside if house prices go up. They get the full benefits of homeownership even though we’re technically the landlord in this scenario.”
If a Keyzy customer loses their job or sees a drop in income, the firm will work with them to find a solution so they can continue to stay in the property and pay the rent. This could include temporarily dipping into the surcharge intended for the deposit.
This is worked out on a case-by-case basis and Groll said: “We want to be as supportive as we can to our customers”. This also allows Keyzy to continue making an income.
While the firm aims to get people to the deposit raising stage within five years, Keyzy will offer rental tenancies of up to 10 years to prepare for any life changes.
Engaging with brokers
Keyzy is currently in the midst of buying its first cohort of properties and closing on its first sale. In the near term, the firm wants to complete up to a few hundred sales a month.
The company has engaged with eight other mortgage broker firms, mainly to get feedback on its offering in preparation for its launch.
Groll said: “They love it, it’s a real solution for them especially when a lot of cases come in, and they don’t know what to tell the client. Some brokers will search for the options available and only one or two will return, which can be embarrassing especially when the rates are hard to sell.
“In our scenario, it’s very transparent and they’re able to get the upside.”
Groll said Keyzy would work in instances where clients were not yet mortgage-ready, but brokers wanted to retain the lead, adding: “This is a way for them to get rewarded.”
Keyzy offers brokers a referral fee which is based on the total property value, not the potential mortgage amount.
