A start-up promising to help home buyers bridge the deposit gap has gone into administration, just months after launching its loan.
OSQO Enterprise Pty Ltd was placed in the hands of administrators Hamish McKinnon and Nicholas Giasoumi of Dye & Co in November.
The company was founded in 2018 and had its public launch in May last year. Investors included lenders mortgage insurer Helia.
The administrators held a creditors’ meeting last month, at which it was decided not to wind the company up. Its assets will be sold to two of its directors. Related creditors will not be paid any of the proceeds.
OSQO developed a platform designed to raise funds from a range of sources, including private investors, to lend to home buyers.
Borrowers needed a minimum deposit of 5 per cent to be eligible for an OSQO deposit gap loan. The interest rate was variable, benchmarked to the borrower’s home loan interest rate and payable monthly. The borrower could repay at any time.
Loans were structured as interest-only for the first 10 years. After that, borrowers would have had to repay accrued “property growth interest”, based on the appreciation in the property’s value.
OSQO would pay investors quarterly interest at prevailing mortgage rates.
It claimed its loan works out be cheaper than the cost of lenders mortgage insurance would be if the borrowers took out a loan with a loan-to-valuation ratio over 80 per cent.
Innovation in the home loan market is tough. Lenders and fintechs that have developed a range of alternative home loans, deposit funding options and shared equity arrangements over the past few years have struggled to get their message out to the market.
Recent CoreData research found that awareness of “alternative pathways” is low. Among respondents, only 62 per cent of first home buyers said they were familiar with the government’s Home Guarantee Scheme and 61 per cent said they were familiar with lenders mortgage insurance.
Forty per cent said they were familiar with rent-to-own schemes, 30 per cent with government shared equity products, 19 per cent with co-ownership products, 16 per cent with commercial shared equity arrangements and 7 per cent with deposit gap loans.
It is understood that OSQO also made it hard for itself by going to the market before its platform was fully developed. It attracted very little investor interest and has made only a few loans.