The British Government is to launch a £2 million competition in the coming weeks for an app to help the 11 million people who rent a home to improve credit scores and mortgage applications.
The Treasury is offering £2 million to budding entrepreneurs who can develop an application that will enable tenants to record and share their rent payment data, helping to improve their chances of getting a mortgage.
Currently, a history of meeting rent payments is not routinely recognised in people’s credit scores, and is not commonly taken into account when banks conduct mortgage affordability assessments. This increases the cost of borrowing for rental tenants, and creates a barrier to getting onto the housing ladder.
Rent payments are usually an individual’s largest monthly outgoings, and are therefore a significant indicator of one’s creditworthiness as a borrower. For this reason, it is right that a history of successfully paying your rent should be recorded and recognised.
‘People’s monthly rent is often their biggest expense, so it makes sense for it to be recognised when applying for a mortgage. Without a good credit score, getting a mortgage can be a real struggle,’ said Stephen Barclay, the Economic Secretary to the Treasury.
‘Most lenders and credit reference agencies are unable to take rental data into account, because they don’t have access to it. The Rent Recognition Challenge will challenge firms to develop an innovative solution to this problem and help to restore the dream of home ownership for a new generation,’ he added
The competition will open to entries later this month and be open until March 2018. Development will run from April 2018 to October 2018.
Winning bids will be selected by a panel of leading figures from the FinTech sector. The competition will provide an initial round of grant funding to six promising proposals, who will receive £100,000 each to support the development of a prototype product.
Next, the expert judges will select three to four teams, who will receive additional funding and support to bring their ideas to market.
