Their Partnership Mortgages are for 20% of the value of an owner occupied home alongside a repayment mortgage of up to 60% from a traditional lender and a deposit of at least 20%.
There are no monthly commitments on the Partnership Mortgage and Castle Trust will share 40% of any profit made by the homeowner when they sell or at the end of the mortgage term. The company will also share 20% of any loss made if the home was bought with a Partnership Mortgage.
Castle Trust is committed to ensuring that customers receive independent financial advice on all aspects of Partnership Mortgages. The company will only accept Partnership Mortgage applications from mortgage advisers who have undergone its CII-accredited training programme and passed the exam.
Mortgage advisers will need to explain all the features and potential risks of a Partnership Mortgage to their clients - and customers will have to acknowledge these before Castle Trust will consider a loan. It will also undertake on-going mystery shopping with advisers to ensure that the product is always explained fully and properly.
Castle Trust has agreed partnerships with a panel of primary lenders and plans to expand the panel over time. It believes the Partnership Mortgage will benefit lenders as it reduces the risk on their balance sheets while enabling them to increase lending and offer a safer way for customers to borrow.
Sean Oldfield, chief executive officer, Castle Trust, said: “It is well documented that many people, despite having good credit histories and sizeable deposits or equity in their homes, are finding it difficult to secure mortgages. This is a result of lenders’ desire to preserve capital. The Partnership Mortgage helps lenders overcome this issue so many more good quality customers can secure the mortgage they want.
“We are equally excited about our HouSA and the unique opportunities this offers investors to gain exposure to the national housing market directly or through an ISA or a SIPP.”
Sir Callum McCarthy, chairman, Castle Trust, added: “Castle Trust aims to bring solutions to problems which have too long affected the UK housing market.
“It is good news for banks and building societies who lend alongside Castle Trust because it reduces the risk on their balance sheet, and good news for consumers as it reduces the risk of homeownership, whether they want to buy a property or invest in housing as an asset class.
“Central to our business is a determination that customers are at all times treated fairly. That is why Partnership Mortgages will only be available through properly trained and qualified advisers.”
Mortgage market issues
Adviser research from Castle Trust shows 75% of IFAs believe the mortgage market needs more innovation.
Consumer research reveals that up to 1.57 million people have had mortgage applications worth nearly £227 billion rejected in the past five years equivalent to on average £144,600 each. The average deposit or equity in property for these rejected mortgages was around 20% while 794,000 had over 20%.
Castle Trust research reveals that 71% of IFAS believe that the amount banks will be willing to lend through residential mortgages will be lower than historical levels. Some 72% anticipate that mortgage rates will increase over the next five years.
In terms of negative equity, Castle Trust analysis of Land Registry data reveals that 31 of the 36 metropolitan districts in England saw average house prices fall between July 2011 and July 2012. Some 43% of IFAs interviewed by Castle Trust believe that the problem of negative equity will worsen over the next three years.
Partnership Mortgages in detail
The benefits of a Castle Trust Mortgage could include:
• It is a safer way to buy a home
• It reduces monthly mortgage commitments
• It reduces a customer’s exposure to rising SVRs
• It allows the homeowner to be economically in between renting and full ownership
• It reduces a homeowner’s financial concentration in their largest asset
• It reduces the risk of negative equity and of arrears and repossession
• It can be cheaper than just having a traditional mortgage if the value of your home rises by less than around 3% a year
Mortgage advisers will need to explain all the features and potential risks to their clients - and customers will have to acknowledge these before Castle Trust will consider a loan. It will also undertake on-going mystery shopping with advisers to ensure that the product is always explained fully and properly.
Property as an investment
Castle Trust research with IFAs reveals that 56% expect the Halifax House Price Index to increase over the next three years, with only 20% expecting it to fall. The numbers expecting it to rise increases to 68% and 83% when looking at five and 10 years.
When compared to stocks and shares investments, 62% of IFAs believe that average house prices will be less volatile over the next three years. The corresponding figures for five years and 10 years are 67% and 66% respectively.
Castle Trust is also offering investment products with fixed terms of three, five and 10 years linked to the Halifax House Price Index. Returns beat the index whether it rises or falls over the term.
The Growth and Income HouSAs qualify for ISAs and SIPPs. Minimum investment is from just £1,000 and there are no annual management charges. An initial fee of up to 3% is payable, depending on what the client agrees with their financial adviser.
Strong management team
Castle Trust has a strong executive team and a board that includes Sir Callum McCarthy, former chairman of the FSA and non-executive director of HM Treasury, the Rt Hon John Gummer (Lord Deben), former Secretary of State for the Environment, and Dame Deirdre Hutton CBE, non-executive director of HM Treasury and a former chair of the National Consumer Council and deputy chair of the FSA.
