• Government’s expanded Help to Buy scheme endorses Castle Trust’s shared equity approach
• Partnership Mortgages for responsible borrowers wanting an existing home complement Help to Buy
• Four in five mortgage customers want innovation to make homeownership easier
The Government’s Help to Buy scheme for new homes outlined in yesterday’s Budget strengthens the ‘shared equity revolution’ in the mortgage market and supports private sector solutions including Partnership Mortgages, shared equity pioneer Castle Trust says.
Castle Trust’s new research1 shows a high level of demand for innovation in the mortgage lending market, including shared equity. Around four in five mortgage customers (79%) want their mortgage lender to offer more creative ways to make homeownership easier.
Sean Oldfield, chief executive officer, Castle Trust said: “Imitation is the sincerest form of flattery and we therefore very much support the Government’s initiative for home buyers and their continued endorsement of shared equity. The Government’s initiative exactly supports our approach to Partnership Mortgages and now the government is helping people to buy a new home.
“Castle Trust only provides Partnership Mortgages for existing homes, rather than new build homes. There are about 25 million existing homes and only just over 100,000 new homes built per year, so we are excited to be providing homebuyers with a huge range of purchase opportunities that significantly expand the government offering.”
Castle Trust believes homebuyers with a 5% deposit that want a new build property will support the Government scheme, which, like Partnership Mortgages, helps to reduce their monthly payments. Castle Trust has already strong demand for its innovative Partnership Mortgages since launch in October 2012 with support from borrowers, lenders and independent mortgage advisers.
Housing Minister Mark Prisk said when Castle Trust launched: “I want to see private companies devise new and innovative ways to help those who want to become homeowners to do so as Castle Trust is working to do.”
Partnership Mortgages, which are available on existing homes, are for 20% of the value of an owner occupied home and share in the pain or the gain with the customer. Partnership Mortgages are available alongside a repayment mortgage from a traditional lender. There are no monthly commitments on Partnership Mortgages and Castle Trust shares 40% of any profit (ie £4,000 of each £10,000) made by the homeowner when they sell or come to the end of the mortgage term. The company also shares 20% in any loss (ie £2,000 of each £10,000) made on a home bought with a Partnership Mortgage.
Sean Oldfield said: “The Partnership Mortgage helps lenders reduce risk and enables many more good quality customers to secure the mortgage they want. Central to our business is a determination that customers are at all times treated fairly. That is why Partnership Mortgages are only available through properly trained and qualified independent mortgage advisers.”
The benefits of a Castle Trust Partnership Mortgage include:
· It is a safer way to buy a home
· It reduces monthly mortgage commitments
· It reduces a customer’s exposure to rising mortgage interest rates
· 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