Castle Trust – which describes itself as a new type of financial institution planning to unlock the UK housing market – has announced its launch into mortgages on October 1 with its shared equity products.
Under its scheme, borrowers who already have a 20% deposit will be able to take out a further 20% loan from Castle Trust, enabling them to put down a 40% deposit with another lender. As a result, they will qualify for a 60% LTV mortgage – at much cheaper terms than an 80% mortgage.
The 20% loan from Castle Trust will attract no monthly repayments, but borrowers will have to repay the loan in full when they sell the property. At that point, Castle Trust will take a 40% share of any increase in the property’s value upon sale, or accept a 20% share of the loss if the value has fallen.
The product will not be available direct but will be sold via independent intermediaries who have gone through Castle Trust’s accreditation from the Chartered Insurance Institute.
Also from October 1, Castle Trust will be offering a range of House Price Savings Accounts – ‘HouSAs’. These are ISA-type investments linked to national house prices as quoted by the Halifax House Price Survey, and which will help fund the mortgage scheme.
Earlier this month, Castle Trust appointed its commercial director Mike Hughes to head up investment distribution on top of his responsibilities for the new partnership mortgages.
Castle Trust chief executive Sean Oldfield said: “There has been great interest in the business we are planning to launch and we are incredibly excited to be able to tell customers and partners exactly when we are opening our doors to investors and home owners.
“This really will be a momentous event in the residential property market because we will be offering investments and mortgages the like of which have simply not been available until now. Castle Trust will be a shot in the arm for the UK housing economy.”
A major backer of Castle Trust is JC Flowers, the US equity firm that bankrolled the Kent Reliance Building Society.
Comments
Doesn't that fall foul of the FSA rules with regards to being able to pay the loan off early? For example if I won the lottery I would be able to pay the mortguage off but not the Castle Trust loan and I'm not sure that's allowed. The scheme could work though, I was trying to running exactly the same calculation last week to see if taking out a short term loan to overpay enough debt to bring the mortgage under the 60% would reduce my payments overall