What impact can the lender make on the mortgage market?
Sean Oldfield, CEO of Castle Trust insists that its Partnership Mortgage products are unlike anything offered before and will be complementary to existing shared equity offerings on the market.
Ray Boulger, senior technical manager at John Charcol said the Partnership Mortgage is one of the most innovative products to hit the market, but that the lender still has many challenges ahead.
Terry McCutcheon, group chief executive of Financial Planning Group argues that the Partnership Mortgage products could potentially help get the market moving again.
Sean Oldfield, CEO of Castle Trust
What we’re doing is unlike anything that has been done before.
Our Partnership Mortgages offer responsible homeowners new choices and added flexibility in how they buy or remortgage their home. But they also do more than that.
They enable mainstream lenders to lend to more customers while at the same time rebuild their balance sheet, as required by the Financial Policy Committee, because less risk capital is needed for a 60% LTV mortgage than for an 80% LTV deal.
Unlike existing shared equity, Partnership Mortgages will be available on existing homes, to applicants aged between 18 and 55 with a good credit history and a deposit or equity of at least 20% of the home’s value.
We are not helping those struggling to buy a home, nor are we enabling buyers to buy a more expensive home than they would otherwise be able to. Partnership Mortgages are complementary to existing shared equity offerings.
Our Partnership Mortgages are complementary to existing shared equity offerings. The mortgages will be available only through advisers who have successfully completed the CII-accredited training programme, which accounts for a quarter of their annual CPD hours. Now that we have set our launch date for Oct 1, we are starting our training programme and will begin to ‘train the trainers’ at the first firms to advise on Partnership Mortgages.
Ray Boulger, senior technical manager at John Charcol
Although other shared equity schemes are available most are subsidised and/or have restricted availability, e.g. FirstBuy, developer and Housing Association schemes, and only require 5% deposit. Castle Trust has no direct competitors and bearing in mind the tortuous route to obtaining FSA authorisation these days, it is likely to take any potential new provider over a year to launch.
The Partnership Mortgage is one of the most innovative products to hit the mortgage market for many years and so will undoubtedly generate significant interest not only from intermediaries and the trade press, but also the consumer media. As one of the launch brokers, John Charcol will certainly discuss it as an option with appropriate clients and recommend it where suitable.
Castle Trust has overcome its biggest challenge, the laborious process of obtaining authorisation from the FSA. Its next challenge is educating first charge lenders.
The Partnership Mortgage is 20% and requires no monthly payments for the whole mortgage term (maximum 25 years) and a minimum 20% deposit (or 20% equity), resulting in a maximum LTV for the first lender of 60%, which must be on a repayment basis.
Allowing such a second charge mortgage should be a no brainer as it offers low risk lending. What’s not to like for the first charge lender, apart perhaps from adapting IT systems?
Terry McCutcheon, group chief executive of Financial Planning Group
The Partnership Mortgage concept from Castle Trust looks like an exciting and unique addition to the market and may even help to get the market moving once it gains momentum.
This new product has the attraction to help first-time buyers access some of the market’s more attractive rates, which are normally only available to borrowers with 40% deposits.
By lending the borrower an additional 20% of the value of their potential home purchase, the Partnership Mortgage bridges the gap between a standard 80% mortgage and a more attractive 60% scheme.
Second-time buyers and people wishing to raise funds to help their offspring purchase a home or raise capital, are also able to benefit.
This new innovation that may involve sharing the future equity growth in a home, will clearly not suit everyone.
The ability to reduce monthly commitments and share the potential risk of home ownership certainly seems in tune with the prevailing market conditions. A lot of work has clearly gone in to making sure any risk is fully understood.
