Based on a similar model that chief executive Sean Oldfield set up in Australia, the company is split into three parts: retail investment, balance sheet and partnership mortgage.
On the partnership mortgage side of the business, anyone with a 20 per cent deposit towards a house can apply to Castle Trust for a further 20 per cent of the property’s value, meaning their bank or building society can offer them a cheaper mortgage.
This 20 per cent is interest free and has no annual charges; instead, when the house is eventually sold, Castle Trust will reclaim their original investment plus 40 per cent of any increase in the value of the property. If the property is sold at a loss the company will reclaim its original investment minus 20 per cent of any loss.
On the investment side of the business, Castle Trust can offer growth and income HouSAs (House Price Savings Accounts) which are linked to the Halifax House Price Index. These are available in fixed term investments of three, five and 10 years, with more attractive rates the longer the money is invested.
For a three-year investment, the investor will receive their original investment multiplied by 1.25 times any increase in the index, while if the index falls, they will receive their original investment back minus 0.75 times any fall in the index. For a five-year investment, they will receive either their original investment multiplied by 1.5 times any increase in the index or minus 0.5 times any fall. For 10 years, they will receive either their original investment multiplied by 1.7 times any increase in the index; or minus 0.3 times any fall.
Returns available on 3-, 5- and 10-yr HouSAs
| HouSA term |
Return if HHPI rises |
Return if HHPI falls |
| 3-yrs |
1.25 multiplied by the percentage rise |
0.75 multiplied by the percentage fall |
| 5-yrs |
1.5 multiplied by the percentage rise | 0.5 multiplied by the percentage fall |
| 10-yrs |
1.7 multiplied by the percentage rise | 0.3 multiplied by the percentage fall |
Source: Castle Trust
Mikkel Bates, head of marketing at Castle Trust, said: "Unlike any other investment in residential property, you can put this money into a Junior ISA or SIPP. This will help grandparents who want to help their grandchildren save for a deposit on a house."
Matthew Nagele, managing director of distribution at Castle Trust, said: "The average first-time buyer puts down a deposit of 23 per cent, and while they are saving that money, they may not want to put it in equities because of what happened in August, or put it in the building society in case property takes off. We can offer them a way to make sure it keeps pace with house prices."
Castle Trust is currently awaiting FSA approval and is expected to launch before the end of the year.