Private equity investor JC Flowers is backing a new investment and mortgage business, Castle Trust.
Castle Trust will offer investments to retail and institutional investors linked to house prices and top-up mortgages which it says improve affordability for borrowers by lowering their monthly payments.
The firm, which is awaiting FSA authorisation, will offer partnership mortgages, which is a mortgage for 20 per cent of the value of the home. The firm envisages borrowers using the loan to lower their repayments with their primary mortgage lender as they will effectively have a bigger deposit. There are no monthly repayments for the mortgage as the capital of the loan is repaid if the value of the home increases when the borrower sells the property.
Castle Trust will keep 40 per cent of any increase in the property’s value with the borrower keeping the remaining 60 per cent of any increase. If the borrower sells their property at a loss, Castle Trust will share 20 per cent of the loss. The partnership mortgage is only available to borrowers with a 20 per cent deposit and comes with a 0.4 per cent arrangement fee.
The firm will also offer a house price savings account, a fixed term investment product, an income HouSA, which provides a fixed quarterly income, and a growth HouSAs which targets outperforming the Halifax house price index and aims to reduce exposure if prices fall.
Sean Oldfield heads the new firm and is joined by former Treasury chairman and FSA chairman Sir Callum McCarthy (pictured), MP John Gummer, Aifa chairman Lord Deben, former FSA deputy chair Deirdre Hutton and JC Flowers deputy chairman David Morgan.
Oldfield says: “The housing market is the largest asset class in the UK, worth in excess of £4tr, most of which has previously been unavailable to investors. Castle Trust has been designed to help customers with the two most important financial decisions in their lives – investing their savings and buying their home.”