Following recent research highlighting the plight of the first-time buyer saving for more than a decade to achieve their deposit total, a new start-up has launched a lottery style scheme that claims the majority of users will achieve their deposit total significantly quicker than by saving through traditional methods.
Stepladder match savers with others that have a similar target deposit goal; those needing £15,000 would be matched with other savers looking to amass a similar figure.
A computer algorithm then creates a lottery style system, picking a member each month and paying them the full deposit until all members reach their target. This does mean that all members continue paying into the scheme until the circle of savers is closed. Whilst one saver may achieve the money in month 1, others may have to wait longer.
Stepladder claim that in 87% of cases, members will achieve their deposit faster than saving alone.
However, some have argued that the monthly fee of between 2% and 4% can be compared to that of a loan. Some have indicated that it may be safer and offer more control to the user to take out a loan they would have control over, rather than rely on an unpredictable algorithm.
Matthew Addison, chief executive of Stepladder, said: “It’s peer to peer savings which is a similar principle to how building societies became successful in the UK. It plays on that and people like the community feel.
“Each circle has a host which acts like the old-fashioned branch manager of a building society and will answer queries and help people along their saving journey.
“I think there’s a need for collective finance in general and in the past year, we have seen 10 times the number of people engaging with us at Stepladder and there are 12 times the number of people applying to join Stepladder.”
Ruth Whitehead, director at Ruth Whitehead Associates, commented: “It would concern me because often when you’re looking to buy a house, you need the money straight away and you need to be in control of your finances. I would prefer to maintain my money individually.
“Personally, I would rather borrow money from family or another source such as Help to Buy to bridge the gap. I wouldn’t want my finances involved in another person’s timeline.
“With this monthly charge, what’s the difference between you taking out a loan which you have complete control over?”….