1 00:00:03,990 --> 00:00:06,449 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean 2 00:00:06,540 --> 00:00:10,320 Sean Aylmer: Aylmer. In recent years we've seen some really innovative ways 3 00:00:10,320 --> 00:00:13,260 Sean Aylmer: to buy property or to release equity in a home. 4 00:00:13,530 --> 00:00:16,829 Sean Aylmer: Today's guest has come up with another one. Midkey offers 5 00:00:16,829 --> 00:00:19,200 Sean Aylmer: a product that unlocks equity in your home with no 6 00:00:19,200 --> 00:00:22,410 Sean Aylmer: payments until the end of the loan. It's an interesting 7 00:00:22,410 --> 00:00:24,750 Sean Aylmer: idea and I want to look not just at Midkey, 8 00:00:24,750 --> 00:00:27,749 Sean Aylmer: but why more people are turning to unusual ways to 9 00:00:27,750 --> 00:00:31,049 Sean Aylmer: get into the property market or access their equity. Richard 10 00:00:31,049 --> 00:00:34,139 Sean Aylmer: Young is the co- founder and Co- CEO of Midkey. 11 00:00:34,139 --> 00:00:35,460 Sean Aylmer: Richard, welcome to Fear and Greed. 12 00:00:36,000 --> 00:00:38,040 Richard Young: Thanks very much, Sean. Great to be here. 13 00:00:38,729 --> 00:00:42,900 Sean Aylmer: So take me through the Midkey product, what you're doing. 14 00:00:43,920 --> 00:00:48,388 Richard Young: Okay. The Midkey product can be a first or a second 15 00:00:48,389 --> 00:00:53,609 Richard Young: mortgage, but what it really does, it addresses loan serviceability 16 00:00:53,609 --> 00:00:57,720 Richard Young: issues where traditional forms of financing are unavailable to borrowers. 17 00:00:58,320 --> 00:01:01,980 Richard Young: And how does Midkey overcome that? Well, as mentioned, we 18 00:01:01,980 --> 00:01:05,699 Richard Young: are Australia's first no monthly payment home loan. That means 19 00:01:06,569 --> 00:01:10,259 Richard Young: we lend the money, and that when you either sell 20 00:01:10,260 --> 00:01:14,910 Richard Young: the property or voluntarily repay is when you make the 21 00:01:14,910 --> 00:01:19,080 Richard Young: repayments, so that enables us to be more flexible in 22 00:01:19,350 --> 00:01:22,439 Richard Young: situations where we can borrow, but most cases, all of 23 00:01:22,440 --> 00:01:26,789 Richard Young: the cases, is that the borrower will have significant equity 24 00:01:27,089 --> 00:01:29,430 Richard Young: in their homes, of which we can unlock a portion 25 00:01:29,459 --> 00:01:29,910 Richard Young: in there. 26 00:01:30,720 --> 00:01:32,400 Sean Aylmer: Okay. So you're going to have to unpack that bit 27 00:01:32,400 --> 00:01:35,010 Sean Aylmer: for me. Do you take equity in the home? So 28 00:01:35,010 --> 00:01:38,069 Sean Aylmer: let's say I'm rolling off a variable rate mortgage and 29 00:01:38,069 --> 00:01:40,078 Sean Aylmer: I'm going on to a much higher rate with bad 30 00:01:40,080 --> 00:01:42,539 Sean Aylmer: terms and conditions. I want to do something different, but 31 00:01:42,539 --> 00:01:44,579 Sean Aylmer: because of rates at the moment it is a bit 32 00:01:44,580 --> 00:01:46,529 Sean Aylmer: more difficult for me to get it from my current 33 00:01:46,529 --> 00:01:51,690 Sean Aylmer: supplier in a competitive marketplace, so I go to Midkey. How does 34 00:01:51,690 --> 00:01:54,510 Sean Aylmer: it work? Do you take an equity position in the 35 00:01:54,510 --> 00:01:57,090 Sean Aylmer: house or do you take your fee at the end 36 00:01:57,090 --> 00:01:57,989 Sean Aylmer: of it? How does it work? 37 00:01:58,950 --> 00:02:02,190 Richard Young: You raise a great topic now of the mortgage cliff. 38 00:02:02,549 --> 00:02:06,900 Richard Young: So what we do is if we provide, say, 10% 39 00:02:07,230 --> 00:02:10,889 Richard Young: of the value of the house in a Midkey loan, we'll take 40 00:02:10,889 --> 00:02:13,830 Richard Young: 10% of the upside. So a million dollar house goes 41 00:02:13,830 --> 00:02:17,490 Richard Young: from one to 1. 2 million, we'll get 10% of 42 00:02:17,490 --> 00:02:20,400 Richard Young: that upside, so 20% of the upside. If that house 43 00:02:20,400 --> 00:02:24,060 Richard Young: doesn't increase in value, we don't get a fee. So 44 00:02:24,209 --> 00:02:27,660 Richard Young: in addition to that, obviously throughout the course of holding the Midkey loan 45 00:02:29,130 --> 00:02:33,720 Richard Young: the borrower will accumulate simple interest on the loan we provide. 46 00:02:34,110 --> 00:02:36,419 Sean Aylmer: Yeah. Okay. And then they do have the option, though, 47 00:02:36,419 --> 00:02:38,639 Sean Aylmer: to pay that loan off though? 48 00:02:39,030 --> 00:02:39,690 Richard Young: Yes, they do. 49 00:02:39,690 --> 00:02:41,489 Sean Aylmer: If they have a windfall or something like that? 50 00:02:41,520 --> 00:02:44,970 Richard Young: Yeah, absolutely. So the wonderful thing about a Midkey is it 51 00:02:44,970 --> 00:02:48,480 Richard Young: puts the borrower back in charge, so as I mentioned, 52 00:02:48,840 --> 00:02:51,780 Richard Young: the borrower, when they sell the house, Midkey will be 53 00:02:51,780 --> 00:02:55,500 Richard Young: repaid, or when they have a business success or are 54 00:02:55,500 --> 00:02:58,379 Richard Young: fortunate enough to get some money coming their way through 55 00:02:58,379 --> 00:03:02,970 Richard Young: an inheritance or other means, or frankly their income recovers 56 00:03:02,970 --> 00:03:06,600 Richard Young: or gets larger, then they can refinance out the Midkey. 57 00:03:07,169 --> 00:03:09,809 Sean Aylmer: Okay. And where does Midkey get its finance from? Where's 58 00:03:09,809 --> 00:03:10,890 Sean Aylmer: your funding come from? 59 00:03:11,370 --> 00:03:14,399 Richard Young: Our funding comes from institutional investors. 60 00:03:14,790 --> 00:03:16,440 Sean Aylmer: Okay. So it might be a big super fund or 61 00:03:16,440 --> 00:03:19,288 Sean Aylmer: it might be a large high- net- worth family or 62 00:03:19,288 --> 00:03:21,539 Sean Aylmer: something like that who are providing the funds? 63 00:03:21,569 --> 00:03:26,220 Richard Young: Yeah, a combination. Mostly at the moment it's looking at offshore institutional investors. 64 00:03:26,460 --> 00:03:28,770 Sean Aylmer: Yeah, okay. So the money comes in, that's it. So 65 00:03:28,770 --> 00:03:31,350 Sean Aylmer: tell me, how big is the typical loan? 66 00:03:32,070 --> 00:03:35,339 Richard Young: It's a great question. Early days. We think it's around 67 00:03:35,340 --> 00:03:38,370 Richard Young: four to 500,000 would be a typical loan for a 68 00:03:38,370 --> 00:03:41,400 Richard Young: Midkey, but some of the loans early on have been 69 00:03:41,610 --> 00:03:43,050 Richard Young: significantly higher than that. 70 00:03:43,350 --> 00:03:47,820 Sean Aylmer: Okay. And is it the mortgage cliff that's providing you 71 00:03:47,820 --> 00:03:49,650 Sean Aylmer: the opportunity, or the customers at the moment, or where 72 00:03:49,650 --> 00:03:50,850 Sean Aylmer: are they coming from mostly? 73 00:03:51,270 --> 00:03:55,680 Richard Young: It's a broad universe actually, and some people are wanting 74 00:03:55,680 --> 00:03:59,310 Richard Young: to unlock equity to put into their businesses. Others want 75 00:03:59,310 --> 00:04:02,880 Richard Young: to complete home renovations that they haven't been able to 76 00:04:03,300 --> 00:04:06,480 Richard Young: complete and pay for. Others are, yes, in that situation 77 00:04:06,480 --> 00:04:10,590 Richard Young: where traditional interest rates have increased to a certain extent 78 00:04:10,590 --> 00:04:13,140 Richard Young: that they're unable to afford to repay them, so we're 79 00:04:13,140 --> 00:04:15,720 Richard Young: looking at situations where we go to pay down a 80 00:04:15,720 --> 00:04:20,339 Richard Young: significant amount or all of certain first mortgages because of 81 00:04:20,339 --> 00:04:23,159 Richard Young: that issue, so it's a combination of people who are 82 00:04:23,160 --> 00:04:27,599 Richard Young: looking to expand their debt to do things like invest 83 00:04:27,599 --> 00:04:30,989 Richard Young: in their businesses, buy new property, et cetera, or, as 84 00:04:30,990 --> 00:04:33,960 Richard Young: I said, to consolidate debts or reduce those first mortgages 85 00:04:34,410 --> 00:04:38,580 Richard Young: and unlock more cash flow for their monthly expenses, which 86 00:04:38,580 --> 00:04:39,660 Richard Young: we all know have been rising. 87 00:04:40,349 --> 00:04:42,359 Sean Aylmer: Stay with me, Richard. We'll be back in a minute. 88 00:04:48,299 --> 00:04:51,300 Sean Aylmer: I'm speaking to Richard Young, co- founder and Co- CEO 89 00:04:51,300 --> 00:04:56,460 Sean Aylmer: of Midkey. I know you're targeting... I've seen some paraphernalia 90 00:04:56,460 --> 00:04:58,049 Sean Aylmer: and you're targeting midlife- 91 00:04:58,049 --> 00:04:58,049 Richard Young: Yeah. 92 00:04:58,050 --> 00:05:02,099 Sean Aylmer: ... which I presume, people like me, middle of my life. Is 93 00:05:02,099 --> 00:05:06,270 Sean Aylmer: it because I've built up equity in my home? Is 94 00:05:06,270 --> 00:05:11,880 Sean Aylmer: it because that 40, 50- year- old are more entrepreneurial? Why midlifers? 95 00:05:13,260 --> 00:05:15,719 Richard Young: Well, we like the midlifers. I'm one of those as well, Sean. 96 00:05:15,719 --> 00:05:19,979 Richard Young: So no, I think the addressable markets, there is definitely 97 00:05:20,160 --> 00:05:23,730 Richard Young: people in their midlife, have more accumulated, in most cases, 98 00:05:23,730 --> 00:05:27,659 Richard Young: equity in their homes, and we wanted to provide... we 99 00:05:27,660 --> 00:05:31,320 Richard Young: are the first provider of this sort of loan for 100 00:05:31,320 --> 00:05:34,019 Richard Young: the people in their midlife, and so we think it's 101 00:05:34,020 --> 00:05:37,498 Richard Young: a significant market opportunity, but it points to more that 102 00:05:37,559 --> 00:05:39,629 Richard Young: there's a lot of stuff that goes on in your midlife, 103 00:05:40,020 --> 00:05:43,080 Richard Young: ups and downs, and we think there's a good opportunity 104 00:05:43,080 --> 00:05:45,990 Richard Young: to help those people in their midlife with their challenges 105 00:05:46,350 --> 00:05:51,060 Richard Young: and also realise their goals, financial goals. To the point is, 106 00:05:51,540 --> 00:05:54,300 Richard Young: in theory, not in theory, in fact, we can actually 107 00:05:54,300 --> 00:05:57,928 Richard Young: lend to anyone who's over 18, is eligible, and/ or 108 00:05:57,928 --> 00:06:02,550 Richard Young: anyone who's older as well, but we're focused on the 109 00:06:02,550 --> 00:06:03,330 Richard Young: midlife people. 110 00:06:03,690 --> 00:06:06,238 Sean Aylmer: Okay. Now, we always tell listeners that they must read 111 00:06:06,240 --> 00:06:08,488 Sean Aylmer: terms and conditions of anything that they're getting involved in, 112 00:06:08,490 --> 00:06:11,849 Sean Aylmer: and this isn't an investment podcast, so keeping that all 113 00:06:11,849 --> 00:06:14,729 Sean Aylmer: in mind, why is it that we're suddenly seeing so 114 00:06:14,730 --> 00:06:18,059 Sean Aylmer: much more flexibility in the home lending market? And this 115 00:06:18,059 --> 00:06:21,870 Sean Aylmer: is a great example. Until I was doing research on 116 00:06:21,870 --> 00:06:24,420 Sean Aylmer: Midkey I didn't know anything about that sort of product. 117 00:06:24,420 --> 00:06:26,940 Sean Aylmer: I presume there's something overseas or something a bit similar, 118 00:06:26,940 --> 00:06:29,400 Sean Aylmer: but we're just getting so much more flexibility in the market. 119 00:06:30,330 --> 00:06:33,450 Richard Young: Well, I think find a big problem and it's an 120 00:06:33,450 --> 00:06:36,330 Richard Young: opportunity for a creative solution, right, and it's a big 121 00:06:36,330 --> 00:06:39,120 Richard Young: problem, and as I mentioned at the start, this is 122 00:06:39,510 --> 00:06:44,760 Richard Young: driven by, quite rightly, the APRA regulations around loan serviceability 123 00:06:45,059 --> 00:06:48,480 Richard Young: for people's mortgages, and the values of people's houses have 124 00:06:48,480 --> 00:06:53,070 Richard Young: grown but their incomes haven't, so under the loan serviceability 125 00:06:53,070 --> 00:06:56,250 Richard Young: requirements it created the need for the product, and I 126 00:06:56,250 --> 00:06:58,830 Richard Young: suppose we looked at it, we think there are other 127 00:06:58,830 --> 00:07:03,359 Richard Young: players, there are other subsets if you like, in this 128 00:07:03,360 --> 00:07:07,440 Richard Young: more innovative space. You might have deposit gap insurance, you 129 00:07:07,440 --> 00:07:11,759 Richard Young: might have shared equity solutions, you might have traditional reverse 130 00:07:11,760 --> 00:07:16,739 Richard Young: mortgages, you might have even bridging finance, et cetera, and 131 00:07:16,740 --> 00:07:20,190 Richard Young: all of them serve all their purposes, but the interesting 132 00:07:20,190 --> 00:07:22,920 Richard Young: thing about Midkey is the way we're structured is it 133 00:07:22,920 --> 00:07:26,429 Richard Young: can serve most of those markets as well, but yeah, 134 00:07:26,429 --> 00:07:29,249 Richard Young: I think it comes back to the problem has become 135 00:07:29,250 --> 00:07:33,420 Richard Young: so large and I think I love a challenge, and together with 136 00:07:33,420 --> 00:07:37,950 Richard Young: Scotty, my business partner, and we believe we've solved this problem. 137 00:07:39,330 --> 00:07:42,899 Sean Aylmer: Everyone loves a business partner called Scotty, Richard Young from 138 00:07:43,080 --> 00:07:46,800 Sean Aylmer: Midkey. I suppose where I was leading with that question, 139 00:07:47,100 --> 00:07:50,490 Sean Aylmer: the traditional financiers and the four big banks are the obvious 140 00:07:50,490 --> 00:07:54,210 Sean Aylmer: ones in the mortgage market, they are a lot less 141 00:07:54,210 --> 00:07:57,599 Sean Aylmer: flexible. Is Midkey and others, are they leading the way, 142 00:07:57,599 --> 00:08:00,599 Sean Aylmer: so in five, 10, 20 years, we're going to see more 143 00:08:00,599 --> 00:08:02,880 Sean Aylmer: of this sort of stuff from bigger lenders or not? 144 00:08:04,320 --> 00:08:07,710 Richard Young: Well, I think that all the banks, et cetera, we are 145 00:08:07,710 --> 00:08:11,040 Richard Young: regulated by ASIC, and the banks obviously APRA. APRA are quite 146 00:08:11,040 --> 00:08:13,350 Richard Young: right that we've had a great financial system in Australia, 147 00:08:13,350 --> 00:08:17,309 Richard Young: very stable because of those, if you like, guard rails 148 00:08:17,309 --> 00:08:20,549 Richard Young: that they've put in place. That would require changes to 149 00:08:20,549 --> 00:08:24,480 Richard Young: those guidelines. On the flip side, I think that there'll 150 00:08:24,480 --> 00:08:27,780 Richard Young: be opportunities maybe for followers to come in off the 151 00:08:27,780 --> 00:08:30,000 Richard Young: back of what we are doing and others to grow 152 00:08:30,000 --> 00:08:30,720 Richard Young: in this space. 153 00:08:31,440 --> 00:08:34,500 Sean Aylmer: You're talking about midlifers, Richard. You worked at Macquarie for 154 00:08:34,500 --> 00:08:37,020 Sean Aylmer: quite a few years and you've now gone and founded 155 00:08:37,020 --> 00:08:39,509 Sean Aylmer: this. Do you like running a, I'm going to say 156 00:08:39,509 --> 00:08:42,029 Sean Aylmer: midsized business, but starting off as a small business shall 157 00:08:42,029 --> 00:08:44,670 Sean Aylmer: we say? Are you enjoying it, being out of corporate 158 00:08:44,670 --> 00:08:46,830 Sean Aylmer: life and running your own business? 159 00:08:47,820 --> 00:08:50,488 Richard Young: I absolutely love it and I think Macquarie is a 160 00:08:50,490 --> 00:08:55,530 Richard Young: fantastic institution, very entrepreneurial, and I've enjoyed my time there. 161 00:08:55,530 --> 00:08:58,799 Richard Young: It was fantastic time up in Asia and I really 162 00:08:58,799 --> 00:09:02,790 Richard Young: love the... I think the opportunity commercially that we think 163 00:09:03,570 --> 00:09:07,199 Richard Young: is available to us that we're prosecuting, but also, as 164 00:09:07,200 --> 00:09:11,609 Richard Young: I said, the ability, the societal opportunity to help people 165 00:09:11,790 --> 00:09:16,860 Richard Young: as well, is really drives myself and Scott and our 166 00:09:17,219 --> 00:09:22,860 Richard Young: team for that matter, to see that not only the commercial success 167 00:09:22,860 --> 00:09:25,410 Richard Young: and help people with the loans, but the difference it makes 168 00:09:25,770 --> 00:09:30,240 Richard Young: to the lives of people in their midlife, and that's 169 00:09:30,240 --> 00:09:31,710 Richard Young: a major driver for us as well. 170 00:09:32,370 --> 00:09:34,169 Sean Aylmer: Richard, thank you for talking to Fear and Greed. 171 00:09:34,740 --> 00:09:35,128 Richard Young: Thank you. 172 00:09:35,850 --> 00:09:38,820 Sean Aylmer: That was Richard Young, co- founder and Co- CEO of 173 00:09:38,880 --> 00:09:41,910 Sean Aylmer: Midkey, M- I- D- K- E- Y. This is the 174 00:09:41,910 --> 00:09:44,190 Sean Aylmer: Fear and Greed Daily Interview. Join us every morning for 175 00:09:44,190 --> 00:09:46,770 Sean Aylmer: the full episode of Fear and Greed, Australia's most popular 176 00:09:46,860 --> 00:09:49,858 Sean Aylmer: business podcast. I'm Sean Aylmer. Enjoy your day.