Castle Trust is looking to launch a new partnership mortgage where borrowers only need a 10 per cent deposit following the Government’s recent Help to Buy plans.
Borrowers with Castle Trust are currently required to provide a 20 per cent deposit in return for a 20 per cent equity loan. They are then able to access rates associated with 60 per cent LTV mortgages.
The loan, available on properties valued up to £2m, is interest free for a 25-year term but requires a repayment of the original sum plus 40 per cent of the capital gained on the property when sold. Castle Trust shares 20 per cent of any reduction in property value.
Money Marketing understands Castle Trust is now looking to launch a 10 per cent deposit product, alongside its current product. It would still supply a 20 per cent equity loan, allowing borrowers access to 70 per cent LTV mortgages.
In last month’s Budget, Chancellor George Osborne revealed Government’s plans to develop a £3.5bn equity loan scheme only available on new build properties up to £600,000. Starting this month and running for three years, it offers up to a 20 per cent loan with a 5 per cent deposit required. It is interest-free for five years and the Government will take its share of any rise or fall in the property’s value when sold.
Coreco director Andrew Montlake says: “Shared equity providers with a good offering should not be put off by the Government increasing its presence in the sector. The Government does not have a terrific record of success with these types of schemes.”