Pauzible.com has taken on the challenge of solving the mortgage crisis facing UK homeowners. Pauzible says it can bring the monthly mortgage payment down to the amount that the homeowner paid back in 2021 and fix it at that level for up to five years. This simple solution should allow homeowners to retain their homes and provide some relief from the increased cost of living.
Why should you care?
“This crisis needs to be addressed urgently, not only for the financial well-being of those involved but also because it has the potential to snowball into a deep nationwide economic downturn,” says Prateek Solapurker, Co-founder of Pauzible. “For those struggling, the Pauzible solution could be a game changer.”
Mortgage rates have almost tripled
In late 2021, homeowners were typically paying 2.29% for their mortgage, but today the average rate on a two-year fixed-rate mortgage is estimated to be around 6%. This increase has been driven by an unprecedented increase in the Bank of England’s (BoE’s) base rate from 0.10% in early December 2021 to 5.25% in early August 2023. A more detailed look at the numbers and potential solutions can be found in Prateek’s article on “Navigating the Great Mortgage Crisis of 2023” available here.
Problem: Short term fixed rate mortgages
There has been a lack of availability of long-term fixed-rate mortgages. As homeowners are coming to the end of their shorter fixed rate terms, they are facing dramatic increases in housing costs. Mortgage payments already constitute a third of monthly outgoings for many households and even the most prudent households are not prepared for a twofold increase or more in their mortgage rate.
Secure your home, or await a fresh start?
“Homeownership remains the largest source of wealth for most UK households,” says Prateek. Eventually, it is also the most effective way of combating inflation.
“This inspired us to design a product to reduce mortgage payments to an affordable level, preserve homeownership, and achieve a long-term solution without incurring additional debt,” says Aivanaa Maraea, Chief Product Officer of Pauzible.
Bringing back the 2021 mortgages
Pauzible cannot reduce the BoE base rate. But it can turn back time by pausing the mortgage hike by paying the difference between the new higher mortgage payment and the amount that homeowners can afford. Pauzible’s home equity investment product through its mortgage top-ups effectively reduces the monthly payment to a level as low as it was in 2021. This payment is made every month for a mutually agreed pause period of up to five years. Thereafter, homeowners resume their full monthly mortgage payments.
Not a debt, but a fractional share of property
Pauzible’s payments constitute neither a grant nor a loan. For its payments, it receives a fraction of the value of homeowners’ property. Typically, Pauzible’s share would be less than a fifth of the value of the property but depends on individual circumstances.
As it is not a loan, there is no charge on their property and there are no periodic interest payments and principal repayments. Pauzible’s return on its investment will go up and down with the value of their property.
Your property remains yours
During the pause period, homeowners remain the only title holders of their property. They also have an option during the buyback period of up to 10 years from the first Pauzible payment to buy Pauzible’s share at a reasonable value and regain 100% of the share. After the buyback period, Pauzible has the right to buy their remaining share at a fair market price for it to be able to realise its investment.
The team behind Pauzible has acquired deep knowledge of financial markets, and more specifically in mortgages, through decades of experience at institutions such as HSBC, Barclays, and Deutsche Bank. They are enthusiastic about creating and delivering innovative financial solutions directly to people through technology.