Homebuyers can now get a mortgage without the drudgery of monthly repayments. Too good to be true? Not if Castle Trust, a new lender backed by private equity group JC Flowers, has its way.
Castle Trust wants to launch a 'partnership mortgage' that earns its fees through house price inflation rather than interest payments. Borrowers still need a deposit of at least 20 per cent and a conventional mortgage from a high street lender. But Castle Trust will stump up another 20 per cent in exchange for a 40 per cent share of the house price gain, plus the value of the original loan, when the house is sold. Or if the house falls in value, it will take 20 per cent of the losses.
Castle Trust is in effect offering to act as an equity partner in first-house purchases (buy-to-let is excluded) - though the funding is officially structured as debt, as the buyer remains the sole owner. It is more expensive than a conventional mortgage if house prices rise strongly, but cheaper if they fall or grow by less than 2 per cent a year.
Castle Trust is funding this venture by launching a fixed-term savings product in parallel that provides exposure to house price inflation. There are two options: an income product that yields 2 per cent to 3 per cent, depending on the length of the term, with capital growth or losses matching the Halifax house price index; and a growth product that offers leveraged exposure to the Halifax index on the upside and cushioned exposure on the downside. Matthew Nagele, Castle Trust's managing director for distribution, thinks the savings products - branded HouSAs - will appeal to those who are saving up for a deposit, as well as more experienced investors who want diversification from buying residential property without the hassle of actually owning it.
Contact: www.castletrust.co.uk, 020 7166 6260
