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Castle Trust is a financial services company which launched on 1 October 2012. It takes a new approach to the housing market by creating investment funds that track the Halifax House Price Index, and using the funds raised from these investors to offer a new form of mortgage finance which funds 20% of the cost of the house in return for a share of the profits (or indeed a portion of the losses) when the house is sold. Castle Trust’s investment products are called HouSAs® and their mortgages are called              Partnership Mortgages. # According to the London Evening Standard’s columnist Anthony Hilton[5], the products together have the potential to “revolutionise the market”. The Economist has said that the idea behind Castle Trust could be one of the lasting legacies to come out of the financial crisis.# The U.S. private equity firm, J.C. Flowers has invested £65m into Castle Trust and the business is chaired by Sir Callum McCarthy, the former chairman of the Financial Services Authority.# The board includes former government minister Lord Deben, non-executive director of HM Treasury, Dame Deirdre Hutton CBE and David Morgan A.O.#. Partnership Mortgages A Partnership Mortgage is a new type of shared equity mortgage which gives middle income households a safer way to own a home by reducing mortgage costs and house price risk, according to Professor Susan Smith of Cambridge University and Professor Christine Whitehead of the London School of Economics, based on work they have down for the Joseph Rowntree Foundation. # The Partnership Mortgage is a mortgage for 20% of the purchase price (or valuation) of a property and requires no monthly payments for the whole mortgage term, which is a maximum of 25 years. A minimum 20% deposit (or equity) is required, resulting in a maximum LTV for the first charge mortgage of 60%, which must be on a repayment basis. In exchange for paying no interest, when the Partnership Mortgage is redeemed, assuming this is on sale of the property or at the end of the mortgage term, the amount to be repaid will be the amount borrowed plus 40% of any increase in the value of the property, or less 20% of any fall in value. If improvements have been made, any increased value from these will be deducted before calculating the profit or loss. If the mortgage is repaid other than on the sale of the property or at the end of the mortgage term, or if it was taken out as a remortgage or further advance, Castel Trust will not share in any loss.# Customers with a Partnership Mortgage have a significant reduction (about a third) – in monthly outgoings compared to a traditional mortgage. In addition, if house prices rise at less than 3.5% a year then the buyers will save more in interest than they will eventually give up in shared profits.# In one respect, the Partnership Mortgage is much simpler than traditional mortgages: its interest rates will never change – it is nil for the whole mortgage term, compared to frequent changes on most traditional mortgages. The quid pro quo is that the amount ultimately to be repaid will not be known until the mortgage is redeemed because it will reflect the change in value of the mortgaged property.# Customers can however make estimates on the cost of the Partnership Mortgage based on their assumptions of how their property price will change via a repayment calculator. The UK housing minister, Mark Prisk, has endorsed the Partnership Mortgage. The housing minister indicated that he would like to see more innovation in the private sector and singled out Castle Trust as an example of the sector working to help homeowners.# Partnership Mortgages are said to be available only to responsible home buyers and existing homeowners up to the age of 55# and are only available through approved, qualified mortgage advisers,# such as John Charcol.# [Applications/remortgaging] HouSA® Investments Castle Trust’s investment products enable people to benefit from the UK housing market without having to buy a property.# Until recently there were very few ways for retail investors to put their money in bricks and mortar without taking the big step of going into buy-to-let.# Housing is the biggest asset class in the UK – at £4.3 trillion it is bigger than government bonds (£1.2 trillion), corporate bonds (£400 billion), commercial property (£800 billion) and the FTSE All Share Index (£1.8 trillion) combined. In addition, it has delivered the best risk-adjusted returns over the last 30 years and has gone up three times as much and been much less volatile than commercial, office and retail property. # The 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 Price Index and pay an annual income of between 2 and 3%, depending on the term of the investment. The 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 over the term, or a loss of between 0.75 times and 0.3 times any decline. Both HouSAs are eligible for investments between £1,000 and £1million, and they qualify for ISAs, Junior ISAs and SIPPs.# Investor protection through the Financial Services Compensation Scheme is limited to £50,000 if Castle Trust becomes insolvent.# History behind shared equity and the business model Would be great to include Susan Smith, Christine Whitehead, Andrew Caplin and David Miles http://en.wikipedia.org/wiki/David_Miles Regulation Castle Trust is dual regulated. HouSAs are regulated by the Financial Services Authority, giving capital protection (up to £50,000) under the Financial Services Compensation Scheme should Castle Trust fail. Partnership Mortgages are regulated by the Office of Fair Trading.# Board and management [Citigate to do] External links [Citigate to do]