24th June 2011

Plan to revolutionise mortgages

Readers of my blogs will know that I am always looking at innovative ways to increase activity in the housing market. One of the main issues in recent years has been a lack of mortgage finance.

I was very interested to hear about a new venture – Castle Trust – headed up by Sir Callum McCarthy, the former Chairman of the Financial Services Authority.  This venture has been launched in conjunction with the US private equity firm JC Flowers and is aimed at both house movers and first time buyers.  The Fund would give them a 20% deposit in return for a 40% share of any profits from an eventual sale.  Under the new plan Castle Trust would raise the money for the deposits by selling Bonds to Investors and their returns would be dictated by the Halifax House Price Survey. Investors could take out stakes from a minimum of £1,000.   The business model has yet to gain approval from the Financial Services Authority but it would not need a full Banking Licence. The Management Team of Castle Trust have extensive investment and mortgage industry experience and Sir Callum McCarthy advises that the Scheme is structured in such a way that JC Flowers will make money regardless of whether house prices go up or down.  I understand that JC Flowers have pumped £100m into the venture.

I think this is a truly innovative proposal and could help thousands of people who are struggling to get onto the housing ladder or those struggling to move into a larger house. 

I would advise that I have been in communication with Sir Calllum McCarthy and shall let you know as soon as I have further news to report. But in the meantime I welcome this initiative.

Lindsay Darroch
Head of Property Services



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