It will also enable millions of people, many of whom don’t own their own homes, to benefit from the UK housing market without having to buy a property.
Castle Trust’s research reveals the need for new lending as around 1.57 million people have had mortgage applications worth £227 billion rejected over the past five years, worth on average £144,600 each1.
Furthermore, research among IFAs reveals that 71% of them expect banks to become less willing to lend through mortgages because new regulation means they have to hold more cash on their books2. Around 72% of advisers anticipate that mortgage rates are set to rise.3
Castle Trust is offering a new type of mortgage, called a Partnership Mortgage, as well as two investment vehicles, which qualify for ISAs, Junior ISAs and SIPPs, that allow people to benefit from changes in the Halifax House Price Index. Minimum investment is from just £1,000 and there are no annual management charges.
Castle Trust Partnership Mortgage
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 come to 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.
The benefits of a Castle Trust Mortgage 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 the home rises by less than about 3% a year
Castle Trust HouSA
The Castle Trust Income HouSA can be taken out for terms of three, five or ten years and the capital value will track any rise or fall in the Halifax House Price Index and it pays an annual income of between 2% and 3%, depending on the term of the investment.
The Castle Trust Growth HouSA can be taken out for the same terms and offers a gain of between 1.25 times and 1.7 times any increase in the Halifax House Price Index or a loss of between 0.75 times and 0.3 times any decline. Both HouSAs are available for investments of between £1,000 and £1million.
The benefits of HouSAs are:
- Returns are better than the Halifax House Price Index, whether the index rises or falls
- Provides some protection against a fall in the Halifax House Price Index
- Tax free investment options
- You can invest from as little as £1,000
- It is an alternative to a buy-to-let investment, but without the hassle or ongoing costs
- It opens up the housing market for investors who cannot afford to buy a property
Sean Oldfield, chief executive officer, Castle Trust said:
“The UK housing market has provided excellent risk-adjusted returns over the years. However, many have missed out on these returns because they have not been able to buy an investment property. Our HouSA allows many more people than ever before to invest in the UK housing market in a way that is easy to understand and accessible. It is also appealing to experienced investors who are looking to diversify their investment portfolio.”
Sir Callum McCarthy, chairman, Castle Trust, said:
“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.”
Difficulties in accessing residential mortgages
New research from Castle Trust reveals that as many as 1.57 million people have had mortgage applications rejected in the past five years, worth on average £144,600 each. The average deposit or equity in the property for these rejected mortgages was around 20%, and 794,000 had over 20%4.
Castle Trust research with IFAs reveals that because banks now have to hold more in capital reserves, 71% believe that the amount they 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. 43% of IFAs interviewed by Castle Trust believe that the problem of negative equity will worsen over the next three years.
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
