It has been waiting for approval on its proposed house price index linked savings products or HouSAs since February 2011.
In October last year the Office of Fair Trading approved Castle Trust to offer shared equity “partnership mortgages” which fall under second charge mortgage regulation.
Following the FSA “minded to approve” American private equity firm JC Flowers has agreed to release a further £50m equity to allow the firm to start lending.
The private equity firm has already injected £15m seed capital into the lender.
Mik Bates, head of marketing for Castle Trust, said: "We’re delighted to have got to this stage and are looking forward to talking more seriously to our commercial partners to work out when we can start lending.”
Bates said full FSA approval was imminent but could not confirm a full launch date.
The partnership mortgage is a 20% loan to value equity loan designed to top up borrowers taking a 60% LTV repayment deal with another lender.
It has no monthly repayments and clients repay the loan plus 40% of any increase in property value or the loan minus 20% of any fall in value at the point of sale.
It is hoped the structure will help borrowers’ affordability by giving them access to the lower rates available on lower LTV deals, while making this available to borrowers with a 20% deposit.
Castle Trust estimates this could reduce monthly payments by up to a third.
The savings account provides a fixed quarterly income as well as being linked to the Halifax House Price Index.
Clients can invest in a HouSA from just £1,000.
Castle Trust’s management team is led by chief executive Sean Oldfield and chairman Sir Callum McCarthy, a director of HM Treasury and former chairman of the FSA.
