Home Truths /Ex-NAB execs raise $15m to disrupt home loan market

Ex-NAB execs raise $15m to disrupt home loan market

3 min read | 22 Nov 2018

nathan-michael 2018
nathan-michael 2018

“The win-win model that Athena offers to investors and borrowers has huge potential to disrupt the way home loans are originated, serviced and funded in Australia.”

Athena co-founders Nathan Walsh and Michael Starkey are connecting home buyers directly with superannuation funds for loans. 

Macquarie Capital and Square Peg are the lead investors in a $15 million funding round for fintech start-up Athena, which aims to use the latest technology to steal a march on the big banks in the competitive home loans market.

The firm purports to connect home buyers with loans backed directly by the superannuation industry and was founded by former NAB bankers Nathan Walsh and Michael Starkey.

They have built a cloud-based digital home loan platform, which they claim will save some borrowers currently with the big four banks up to $100,000 over the life of a loan.

The latest capital raise, which also had participation from Apex Capital and Rice Warner, follows an earlier seed round of $3 million in June last year.

The founders told The Australian Financial Review superannuation funds already had large investments in mortgages throughout the country, but these were “almost exclusively” through the banks.

“We’re a digital-first business so we don’t have any expensive branches or broker commissions,” Mr Walsh said.

“And thanks to the cloud-native nature of the platform, we can pass on savings to borrowers. For someone refinancing their loan, they can apply online and in 15 minutes be conditionally approved.”

Funding capacity

By bypassing the banks, Athena claims to be able to offer borrowers lower interest rates.

It is launching a beta pilot of the platform next month, ahead of a full launch in 2019, and already has a wait list of 1000 people, before any public marketing and awareness campaigns.

Athena would not reveal which superannuation funds it already had on board, or what interest rates it would offer, but said it had $500 million of funding capacity at this point.

“Today, superannuation funds have large investments in Australian mortgage assets, via bank intermediation. It’s a sweet deal for the banks – profiting on hundreds of billions in investments by superannuation funds. By investing in home loans directly with Athena, super funds can cut the spread between what mortgage borrowers pay and investors receive,” Mr Starkey said.

“In countries such as the Netherlands, where pension systems are similarly advanced, the impact of this model is already evident.”

Three years ago it was estimated by consulting firm IG&H that about 10 per cent of home loans in the Netherlands were being funded by private funds, backed by institutional investors, usually pension funds.

Numerous private funds supporting home loans now operate in the market including Syntrus Achmea, Munt, Quion and Dynamic Credit.

Driven and focused

As part of Athena’s capital raise, Square Peg’s Paul Bassat will join the board of the start-up.

“The is a great example of the type of team we love to back: Smart, driven and focused on solving an important problem,” he said.

“The win-win model that Athena offers to investors and borrowers has huge potential to disrupt the way home loans are originated, serviced and funded in Australia.”

Athena’s funding round took only a few weeks to officially close, having been in ongoing conversations with investors since last year.

Mr Walsh said being “cloud-native” meant more than just utilising Amazon Web Services.

“We look at the big banks and the pain points of a complex legacy ageing technology platform … being cloud-native isn’t just about AWS, it’s about rethinking every aspect of how to design and develop the platform … It lets us provide a sweet deal on home loans.”

Originally published in The Australian Financial Review on May 7 2018 by Yolanda Redrup.  (Please note that the AFR is behind a paywall).

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