Controversial Castle Trust launches its mortgage offering this week.
The company, chaired by former FSA chairman Sir Callum McCarthy, offers a top-up loan, which means that someone borrowing, for example, a 90% mortgage from a mainstream lender can top it up with an additional loan for 20%.
The borrower benefits from cheaper mortgage rates from lender number one, and will not have to pay Castle Trust anything during the life of the mortgage.
The crunch, however, comes when the borrower sells, since Castle Trust takes a share in the property’s rise in value – or shares the pain of a loss.
If the property has risen in value, Castle Trust will want back its original loan plus a 40% share of the rise in value.
If the home has lost value, Castle Trust will want its original loan back minus 20% of any fall in value.
Thus borrowers using Castle Trust’s proposition will do better in a falling market.
Castle Trust is financing the proposition through savers who invest in ‘HouSAs’, where house prices are linked to the Halifax House Price Index.
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