To reach your destination, it is important to know where you are going and, without a road map, finding your way can be extremely difficult.
Saving for your deposit for a first home is no different, and you need to plan ahead to make sure you are heading in the right direction fast enough to reach your goal: buying your first property.
Putting money aside for a house in the UK can be tough, especially as house prices are growing faster than wages, which means that reaching your target feels like an impossible task, with the goal seemingly moving further away from you, no matter how hard you are running towards it. You may already be saving as much as you can each month, but still struggling to get close to the amount you need for the deposit.
So you need to think laterally; how can you get the money for a deposit together more quickly, without having to stretch yourself further than you already are? The answer: club together with like-minded people who are working towards the same aim over a similar timeframe. This is how StepLadder, a new peer-to-peer property deposit raising service, aims to help young first-time buyers.
This concept of community saving is something that is relatively alien in the UK. Yes, we have some co-operatives in credit unions and peer-to-peer lending, but, despite having a highly sophisticated financial services industry in this country, we have been missing a trick.
Elsewhere in the world, the use of Rotating Savings and Credit Associations (ROSCAs) is commonplace, primarily where access to cheap credit is unattainable because either the country’s financial system is not sufficiently sophisticated, or its citizens are so poor that they simply cannot afford to pay the heinous interest rates and are denied access. These schemes are known as ‘tandas’ in Latin America, ‘cundinas’ in Mexico, or ‘susu’ in Africa and the Caribbean. They are also prevalent in many more areas around the world, including Brazil, Sri Lanka, Japan, Korea, and Indonesia.
ROSCAs provide a service that allows a co-operative savings plan, where the number of people in the ‘circle’ is predefined, the amount that each person wants to receive is predetermined, and the amount paid in each month is set at the start so there are no nasty surprises. The key difference between this and any ‘normal’ savings plan is that, whilst you will be saving the same amount as you would be alone, you have the chance of getting your deposit lump sum much sooner, allowing you to get into your own property faster.
ROSCAs have been described as ‘the poor man’s bank’ because money is not left sitting in accounts, but is instead moved between individuals quickly to meet group ends. But, when it comes to saving for a property deposit, this system has many benefits over the other types of saving schemes in the UK. In fact, you could receive the full amount for your deposit 45% faster, on average, than going it alone.
So, it should come as no surprise that there is finally a way of using community power to good effect, helping first-time buyers step onto the property ladder that bit faster. StepLadder is the first provider in the UK that has taken this concept to market, and is destined to help thousands of first-time buyers achieve their dream of owning, rather than renting, a home much faster than they could on their own.
Planning ahead is still essential to reach your target, but, with StepLadder, instead of the goal moving away from you no matter how hard you save, you have the chance of reaching your objective and getting your deposit much sooner than you could alone.
Matt is the Founder and CEO of StepLadder. He started StepLadder to make a lasting positive impact on UK first-time home buyers and fix a broken system