"We’re here to be a friend of the home buyer."
When it comes to buying your first home in the UK, statistics show it is not an easy feat. To help, StepLadder has come up with a very innovative way to get you on the property ladder quickly.
According to the English House Survey by the Office of National Statistics, home ownership in the traditional first-time buyer demographic was only 36 % compared to 2011, when it was 60%.
Thus, showing that first-time buyers are finding it increasingly difficult to purchase their first home.
Whether you are a first-time buyer or someone interested in moving home, the StepLadder way is helping people buy their homes quicker.
So, how can StepLadder help?
We take a look at how the company uses a well-known financial concept amongst South Asians to help home buyers and find out more from their CEO, Matthew Addison and Muhammad Haider, the Business Development Manager.
How it Works
The company’s process to aid home buyers is based on a familiar concept known to most South Asians and migrants. In the UK, the term ‘committees’ or ‘koordh’ is applied to this method of financial management.
Basically, everyone in a ‘committee’ contributes an equal amount to a common fund on a monthly basis.
Then, one member is either picked at random or agreed by the committee as the receiver of a total amount to be awarded that month. In some cases, if no one withdraws, the pot gets bigger.
This is the method used by StepLadder to help individuals raise a deposit towards buying their home. Especially, first-time buyers.
The scheme can certainly help you raise your property deposit faster.
The group of people is called a ‘circle’ by StepLadder. StepLadder matches you with other members in the circle who are working towards the same deposit target.
Each month, everyone in the circle pays in the same set amount of money, and one member is awarded the total. This happens each month until every member is awarded the total.
So, as a real example, in 2018, StepLadder ran their £500 per month circle for 10 months to help people save £5,000 towards their property deposit.
Their first member to buy her home came from this circle.
- Each member paid in £500 a month for 10 months, and each month one of them would be selected, at random, to receive the £5,000 deposit.
- Once a member was selected, StepLadder offered to introduce them to expert advisors including solicitors and surveyors.
- Once a property offer was made by the member, StepLadder released the funds to the solicitor.
- Saving alone, it would take 10 months to raise £5,000, but by lending and borrowing from each other in this way 9/10 people could get their deposit faster.
StepLadder was also available to answer questions for all the members all the way to their home purchase.
A range of monthly amounts from £25 to £1,000 per month are offered by StepLadder to members of a circle.
Circles are expected to last from 10 to 30 months depending on budget and the deposit members aim to raise.
Talking about the scheme, CEO, Matthews Addison says:
“The amazing thing is to recognise how GLOBAL the concept is – in each country, known by its local name!
“One NGO study indicated that at any point in time, over 1 billion people worldwide are using this scheme – whether called Committees, Chit Funds, Ajo, Susu, Partners or Consorcio.
“The clear vision for the potential to bring these schemes back to the UK & US comes from my graduate school studies at Wharton.
“I spent several months in Brazil and studied Consorcio there (their word for committees or chit funds). There are lessons to be learned from how these operate in over 70 countries around the world.
“In Brazil, 9 million people use these to finance things ranging from dishwasher to autos to their new homes. And this happens in groups that may not even know each other before the a promoter assembles the group – In Brazil, it’s a like a high-street banking offer.
“That research work became my award-winning thesis delivered in 2006.”
Protection of Members
Muhammad Haider, the Business Development Manager, told us how members are vetted and protected.
What if a member cannot afford to pay the monthly commitment?
“At the initial matching stage, we perform a creditworthiness assessment (in the form of reviewing the member’s credit score and credit history) and evaluate ‘affordability’ in terms of the member’s disposable income.
“At the on-boarding stage and before draw begins, details are verified with the same processes and proof documents that a bank or mortgage broker would use.
“All payments are set-up as direct debits into a custody account for Client Money held at Barclays.
“We have financial measures in place that make sure our monthly draws continue for everyone else uninterrupted.
“We encourage people to read all relevant literature for this product before participating in a circle to understand the risks, we cannot provide FCSC cover and capital is at risk.
“The key is that non-payment should be StepLadder’s problem, not our members.”
What happens if a member wishes to leave before their fixed term?
“We do understand that life doesn’t always go according to plan which is why we allow our members to leave the circle if they wish, as long as it is before they have been allocated the sum for purchasing a property and used it.
“If a member cannot afford to pay their commitment after they have used the sum for a purchase, StepLadder has financial measures in place to mitigate this, including waiver cover.”
How safe is the scheme overall for members?
Matthew Addison provided an overview of how safe the scheme is for members, saying:
“We spent eighteen months in development and design before we launched our first Founders’ Circles at the end of 2017.
“This time was spent with, specialist regulatory advisors, credit experts and lawyers to design an offering that mirrored committees or chit funds, as we have seen them operating successfully in other countries.
In terms of additional risk mitigation for members, the monthly funds from members are always kept as Client Money at Barclays, separate from StepLadder operating funds (even different banks!).
“Legally, we can only release the funds back to our members or to a solicitor they appoint for the purpose of buying a home. We also have waiver cover that steps-in if one of our members who has bought their first home
“We also have the support and oversight of our principal More Lending Solutions.
“We are in close contact for compliance purposes, and they review our promotions, membership operations and risk management. Part of our operating agreement with them is a commitment to keep regulatory and wind-down capital set aside.
“In addition, we have a £2million professional & indemnity insurance policy from Hiscox.
“Your capital is at risk and there is no FSCS cover.”
Matthew urges everyone to visit: StepLadder Risk section on their website, for a detailed review of their risk factors.
Worries, Concerns and Questions
With capital risk being a factor, there will be naturally worries for a person considering joining the scheme. So, what kind of questions do members ask StepLadder regarding this?
Muhammad Haider gave us examples of questions asked of them.
What if I’m the last person chosen in the circle?
If you’re the last member of your circle to receive your property deposit then, you will still have raised your property deposit as quickly as if you had saved on your own. Plus, you will still have had access to a range of discounts on property-buying services and professional knowledge
What is StepLadder’s regulated status?
We are an appointed representative of More Lending Solutions which is Authorised and regulated by the Financial Conduct Authority for P2P, you can find us on the FCA register our reference number is 783003.
What happens if I’m not ready to buy a house?
Your money is held in escrow free of charge until you are ready. By the final month, any property deposits still held in escrow by StepLadder are also released to the members to which they were credited (whether or not the relevant members are ready to complete their home purchase), and the circle’s fixed term comes to an end.
How are property deposits allocated?
Through random lottery. Everyone has an equal chance.
How does StepLadder make money?
Whilst we do charge you a monthly fee, this is not for profit. Where we make our money is by introducing you to mortgage lenders and service providers (e.g. solicitors, insurance providers) who pay us a fee if you chose to use their services when purchasing your home.
Everyone is encouraged to see our Frequently Asked Questions section for more answers: StepLadder FAQs
Matthew is hugely passionate about StepLadder producing successful solutions to life problems, saying:
“If I have the vision, resources and the determination to solve a meaningful generational problem in a distinct way, it is my duty to do so. StepLadder is the result of this.”
Matthew Addison tells us how they measure their success, saying
“We judge our success by asking two core questions.
“Have our members felt we’ve helped them on their journey?
“Has our offer met a need in the marketplace?”
To support the first question, here are some example testimonials from StepLadder clients who successfully completed their Circles in 2018, with no defaults and more than half looking for homes today.
Shaan Ahmed (Shaan Ahmed, CEO of Uown – StepLadder Member who received his £12000 deposit in March 2018):
“StepLadder really helps me with the discipline of saving money for your first home, and I really like the community feel”
Luciana & Danylo (Received their £5,000 deposit in April 2018) :
“The idea that we could win any month really inspired us to keep saving! Our Circle host Matt was always available to answer any questions and provided us with advice all the way through our home buying journey!”
Shanae (Single mother who bought her first home with help from StepLadder):
“StepLadder gave me so much personalised support during the homebuying process.”
“Being a single mum, it was really daunting to be facing it alone, but StepLadder really understand and could help me, answer my questions and to just have someone I could go to. That was the golden ticket for me, I really appreciated having that one-to-one support”
For the second question, Matthew elaborates:
“On the second point, we’re gaining exciting amounts of interest. In January 2019, our register of interest has grown 40%!
“We have over 700 people who have applied to StepLadder so far, and that number is growing weekly.
“We believe that the UK market is ready to widely adopt something many of us KNOW has worked for generations around the world.”
Helping First-time Buyers
The scheme aims to help first-time buyers who are finding it difficult to get into the property market, as Matthew explains:
“StepLadder was founded on the belief that the first-time buyer could use someone on their side.
“We believe StepLadder is an innovative and compelling alternative for many first-time buyers.
“But members, individually, need to decide if it is right for them.
“StepLadder aims to be a comprehensive solution for our members’ journey and is unique in today’s market.”
“There are three features really define why StepLadder may be right for a first-time buyer.”
87% of StepLadder members get their property deposit sooner. The time value of our average draw can be measured in the tens of thousands of pounds.
Saving in the StepLadder circles increases chances of reaching a goal by 300%!
For many who know ‘Committees’, you may already understand being part of a community of people working together to ensure everyone benefits.
StepLadder can introduce our members to expert partners with specialist knowledge. In the process, we can also offer discounts from these professionals worth up to £1,500.
Community is the nucleus of the StepLadder offer, as Matthew describes:
“We believe profoundly in the power of community – sharing the journey with others reaching the same goal.
“We can help connect our members, in many cases to people they would never have known otherwise, and at the same time help make that journey to homeownership better.”
Support for Home Buying
In addition to tremendous support they offer first-time buyers, anyone buying a home can get help from StepLadder to realise their chance of buying a property, as Muhammad Haider explains:
“I believe StepLadder is revolutionising property buying and bringing a financial solution that our community knows and values back in a scalable way.
“We also bring a range of support throughout the home buying journey – from a community of peers, to access to expert advice, to negotiated discounts from preferred partners on services including legal and survey.
“We’re here to be a friend of the home buyer.”
For a scheme of this nature, naturally, the process for applicants needs to be thorough. Including any impact of credit score ratings and ability to pay.
So how does the application process screen its members?
Muhammad Haider explains:
“StepLadder has a carefully designed and robust screening process for all applicants, as you can see from our response above about inability to pay.
“We do have credit limits for members, largely because of the financial measures in place, and affordability which means that members invited to circles should be similarly qualified.
“StepLadder offers a range of circles to suit various budgets – and length of commitments.
“This includes First Step Circles, introduced specifically for those at the earliest stage of aiming for their property deposit goals.
“We also intend our screening process to identify behavioural and personality traits that can help to create like-minded groups, and turning individuals into engaged communities.”
To be considered for the scheme you can apply here.
StepLadder has taken a well-proven method used by people in South Asian countries and globally, and converted it into an innovative way to help potential home buyers to purchase their home.
As a non-profit organisation, their aims and goals are simple, using the ‘divide and conquer’ analogy, you can get to your goal of raising a deposit quicker with the aid of others in a StepLadder circle than trying to do it alone.
Their support and services have been created aiming to help you buy your home with ease and above all, quickly.
Visit the StepLadder website for more information.