3 minute read
Interview: Proportunity
“Paradigm shift needed to help first-time buyers”
Vadim Toader
According to research by bridging finance lender KSEYE, one in three UK borrowers has been rejected by a lender on at least one mortgage application submitted by them in the last five years.
In separate research by The Mortgage Lender, it found that 34 per cent of would-be borrowers were turned down because of irregular income or mounting debts.
But as far as Vadim Toader is concerned, there’s often a far more obvious reason. He should know, because the CEO and co-founder of Proportunity was turned down for a mortgage once, much to his surprise.
“I went to Oxford – one of the best universities I could apply to. Afterwards I got one of the hardest jobs I could get in London as an investment banker. And then when I went to buy a house, I was told, ‘You can’t afford it … you’re £100,000 short,” he told Mortgage Introducer.
“I was already making more than the average salary [then]. But there’s a lot of people who don’t have that option.
“It feels like you are penalised – if you’re not a banker, you’re screwed. That’s kind of what the current system is. You’re either born rich or you have to be a banker. And I don’t see that having any logic from a government policy [perspective] or [from] a human decency perspective.”
Fintech-driven lender Proportunity was set up to disrupt the traditional mortgage industry and, as the company blurb boldly states, “make homeownership accessible for all.”
To do that, Proportunity allows firsttime buyers with a five per cent deposit to secure a mortgage while lending the missing down payment and offering competitive rates – up to 20 per cent for bigger homes and/or 45 per cent cheaper monthly payments.
“What we saw was that you can do better, because this whole idea of four-and-a-half times income seems a bit arbitrary,” Toader explained, challenging the established view that the borrower should either have a big deposit or face higher interest rates.
Toader and co-founder Stefan Adrian Boronea decided to leverage technology to help them achieve their objective and access the 200,000 borrowers they say are regularly denied a mortgage.
“We took a data science approach and saw that we can somewhat forecast how house prices are going to evolve. We can analyse a lot more and remove a lot of the risk.
“We punch up all this data about historical price transactions, around 150 factors – 50 around property transactions and 100 about the area.”
These are known factors that people tend to look at when buying a house, including information about local schools, crime rates, and transport links, as well as local amenities and leisure facilities.
He added, “We take that information and use that to kind of due diligence the house because we believe this house will be worth more. So that’s why we can comfortably lend at 95 per cent – and hopefully 100 per cent.”
Toader was critical of regulators and the government, believing they were holding the company back.
“I think the FCA and the system need to change a bit because the limitations seem to be somewhat at odds with reality.
“You can’t limit people to borrowing four-and-a-half times [their] income to buy an asset that is worth twice that because that automatically implies you want everyone else to have £200,000 stashed away somewhere when they’re in their 30s – and I don’t know how many people you know who have that, but I don’t [know many],” he added wryly.
With the cost-of-living crisis, firsttime buyers may well find it even harder to secure a loan from highstreet lenders, a point not wasted on Toader, who urged the government to do more to address the issue.
On Boris Johnson’s muchpublicised right-to-buy proposals, Toader reserved judgment (“it’s not a clear plan”), but was far more dismissive of the ‘bank of mum and dad,’ the increasingly common ‘lender’ of last resort for so many borrowers, which accounted for more than half of home purchases among the under-35s in 2020, according to a study by Legal & General.
“I always tell people it’s not a solution,” he said. “The system needs a paradigm shift because unless we fill that gap, we are going to be the bank of mum and dad for the next generation. And if we can’t get a home, how are we going to help them get one in 20 years’ time?” M I
