JC Flowers, the private equity group that specialises in the financial sector, yesterday confirmed it is to back a venture focusing on the UK housing market.
The US group, which is considering a bid for Northern Rock's 70 branches, revealed it is behind the launch of Castle Trust which is seeking authorisation from the Financial Services Authority (FSA) to allow people to invest in house prices and apply for innovative mortgages. The group has appointed Treasury director and former FSA chairman Sir Callum McCarthy as chairman, and has called in other City grandees to join him on the board.
These include Dame Deirdre Hutton, former deputy chair of the FSA and Treasury director, and Lord Gummer, chairman of the Association of Independent Financial Advisers and former cabinet minister.
The new venture will be headed by Sean Oldfield, who was previously at Macquarie Bank and has spent two years setting up the business which he said was "one of a kind". He added: "Hopefully this will become a hugely important part of the mortgage market in the future."
The service expects to offer investments opportunities to retail and institutional investors in a "new type of financial institution created to unlock the housing market".
Castle Trust will offer investment in UK house price returns and mortgages "and will share the profit or loss with the homeowners". The venture will offer several different services, including an innovative new mortgage dubbed a "partnership mortgage" which it hopes will make buying a home more affordable.
It will also offer a product that tracks the Halifax house price index and offers 1.5 times the change in the level of house prices
Mr Oldfield said: "The housing market is the largest asset class in the UK, worth in excess of £4.3 trillion, most of which has previously been unavailable to investors.
"Castle Trust has been designed to help customers with the two most important financial decisions in their lives – investing their savings and buying their home."
Sir Callum said that by "more appropriately rebalancing the costs and risks of home ownership between homeowners and lenders, and reducing homeowners' financial reliance on their own home, we hope to improve the long-term stability of the UK housing market".Reuse content