NDF Administration has established the house price secure growth plan, a guaranteed equity bond that is linked to the Halifax House Prices index.
The product is also available as an Isa and aims to give investors exposure to the property market without investors having to invest directly.
Investors receive 100 per cent of the growth in the index and also get their original capital back at the end of the five-year term. This is an advantage for cautious investors that they would not have if they invested directly in residential property.
To calculate the returns, the level of the Halifax House Prices Index for July 2002 is recorded and compared with an average of the monthly levels between February 2007 and January 2008.
House prices have been increasing rapidly in recent years, while the stockmarkets that some guaranteed equity bonds are linked to have been moving in the opposite direction. This could make the NDF bond more attractive to cautious investors who want to increase their chances of ending up with more than just their original capital.
Newcastle Building Society's guaranteed property bond is a similar product that also follows the Halifax House Prices Index for five years and guarantees the return of the original capital whatever happens. Returns are calculated in the same way as the NDF product, but the Newcastle bond offers higher potential returns of 120 per cent of any growth in the index.