After spending nearly two decades abroad, Richard Young returned home to his native Australia and noticed a striking trend: many mid-life Australians — even those with substantial home equity — were being overlooked in the nation's financial markets. Many in that age group were struggling to access their home equity without selling their properties.
That insight became the catalyst for Midkey, which Young launched in 2021 with fellow expat returnee Scott Collison. The duo now serve as co-founders and co-chief executive officers of the Sydney-based boutique lender.
Midkey specializes in helping homeowners unlock equity without selling, primarily through second mortgages, and operates across most Australian capital cities.
For the latest Australian Broker Spotlight Series, where we showcase standout talent in the mortgage and finance broking sectors, we caught up with Young to discuss Midkey's mission, his strategies for success and thoughts on what sets Sydney's property market apart.
The following interview has been edited for grammar and clarity.
RY: I was born in Adelaide, trained as a chartered accountant and have had a 30-plus year career in finance, most of which was in Asia, (Hong Kong and Shanghai). The last 17 years in Asia were with Macquarie Group.
When I returned to Australia in 2021, my co-founder [Scott Collison] and I observed that many homeowners had significant equity in their properties, but were unable to access this equity due to restrictions imposed by loan serviceability requirements. The pursuit of solving this loan serviceability problem was the catalyst for the establishment of Midkey.
RY: I have always been interested in starting a business that solves a big problem with a creative solution. I returned from Asia during the COVID-19 period and saw that many mid-life Australian homeowners had significant home equity, but were unable to access this wealth without selling their properties, primarily due to loan serviceability issues.
An idea for an early version of the Midkey loan was presented to my co-founder Scott and I. Together, we realised that this loan concept could be adapted to address the market’s significant loan serviceability issues and we designed the Midkey No Monthly Payments Loan. We established Midkey in the second half of 2021, and then set about making the Midkey No Monthly Payments Loan NCCP-compliant.
RY: Midkey solves loan serviceability for mid-life Australians who have equity in their homes. We enhance serviceability by providing an NCCP-compliant loan, where all interest and principal payments are made at the end of the loan, and where the end of the loan is determined by events, rather than a fixed timeframe. This means that Midkey is testing an applicant's ability to make zero dollars in monthly payments. And it means Midkey can often lend when traditional lenders cannot.
We focus on mid-life homeowners, because they typically have sufficient equity to meet our loan-to-value (LVR) requirements. We lend either as a first or second mortgage, and 80% of our loans are second mortgages. As a second mortgage, we can lend up to a 30% LVR. When this LVR is combined with the priority loan, our total second mortgage maximum LVR is 80%. When we lend as a first mortgage, we can lend up to 35% LVR. Because most of our loans are second mortgages, we complement existing lenders.
We lend to owner-occupied homes, investment properties and apartments. We do not lend to corporate or trust-owned properties. The Midkey loan does not require regular payments, does not have a fixed repayment timeframe and charges simple interest. In exchange for these benefits, Midkey charges a deferral fee, which is calculated as a proportion of the increase in the property price over the life of the loan. This change in value is measured using well-known independent valuers.
We are headquartered in Sydney and lend to Australian capital cities and large population centers, with the exception of Melbourne where we expect to lend in 2026.
RY: Loan serviceability is a big problem within the home mortgage market, and Midkey is the only NCCP-compliant mortgage lender that is able to address this problem for borrowers of any age (over 18 years old).
The serviceability problem stems from the average Australian home increasing at a faster rate than net incomes for the last few decades. Until Midkey, many Australians have not been able to access this excess home equity, unless they sold and downsized their properties. This creates significant demand for Midkey loans.
Homeowners in their mid-life have various cash flow demands and aspirations. We observe many of our borrowers replacing existing traditional debt with a Midkey No Monthly Payments Loan, which enables them to improve their monthly cash flow. Other borrowers use a Midkey loan to release equity to undertake renovations, buy a larger property or act as a bank of mum and dad to help their children enter the property market. Borrowers also use our loans for non-property-related expenses, such as starting a business, making an investment, paying private school fees and paying unexpected medical bills.
RY: When introducing a new product like ours to the mortgage market, it is essential that all stakeholders have a clear understanding of its costs, constraints and potential issues. Midkey achieves this by requiring significant broker training, providing brokers with selling tools, ensuring borrowers understand the product and its implications, having clear loan contracts and ensuring our processes comply with all Australian Securities and Investments Commission (ASIC) requirements.
RY: Sydney residences have generally outperformed those in other cities over the last decade. This, combined with a higher median value, means many Sydney households have larger amounts of excess equity. Most homeowners over the age of 35 have held property for long enough to see their properties increase in value at a faster rate than their incomes. The challenge for many Sydneysiders is that they often have significant home equity, but are unable to access it due to serviceability issues.
