A product for the squeezed middle?
Wednesday, December 21st, 2011

I have a little blog owing having talked to Castle Trust about their planned products twice now. The first time the Money Debate got attacked by internet gremlins. (You may have not realised that something was missing in your life for a couple of weeks around the end of the summer but it was. Must have been Spectre or some similar evil international organisation).

So I had a little chat with Castle Trust a couple of weeks ago. Now while the proof the pudding is in the eating etc., and it hasn’t got its approval yet, Castle Trust strikes me as an example of properly tested, properly researched innovation. It has the right credentials and when they list them it strikes me as a lot more than just marketing speak.

The investment component arguably has the most appeal. It will be an Isable, Junior Isable (they are calling it a HouSA) and a Sippable investment tracking the Halifax House Price Index – structured either for growth or for income. I think a lot of IFAs, once convinced of the safety of the investment, will be very interested. The investments have been analysed by Barrie and Hibbert. To be Barried and Hibberted is almost becoming a verb. The financing is from J.C. Flowers while AKG has checked out the financial strength with further legal advice from Marfarlanes. It has also won plain English awards and is to offer CII accredited training for the sharedequity component on the mortgage side.

The mortgage side is of course where the plain English will be most necessary. That is also where I think the real marketing challenge resides. The theory is that if people want a lower exposure to the cost of their house, say 60 per cent, rather than 80 per cent, then Castle Trust will help them with a loan while sharing in the change inthe value of the house. The loan will cut the monthly payments and allow borrowers to access the better, lower LTV loans available on the market. It also takes the burden of any price fall on at least part of the property. It underwrites both the borrower and to an extent the property. Admittedly the borrowers will have to be under the age of 55 with a 20% deposit. But it gives them an additional 20% second charge loan with no monthly repayments. At some stage they may buy out the remainder of the property which they can do at the market rate for the house.

A couple of further thoughts. It is arguably better launched now, when we know the shape of the Mortgage Market Review, so that everyone on that side of the industry knows where they want to position themselves and where this product might sit. There is a renewed emphasis on mortgage advice and this is an advice heavy product. It may address some affordability concerns certainly in general, but it is not a product – on the mortgage side at least – for those really struggling to get on the ladder – it is more a deal for the famously squeezed middle.

In terms of investments, it works in about four different ways, offering an investment that keeps pace with house price inflation, which may suit those trying to pull together a deposit, certainly if they think house prices in their area are rising at roughly the Halifax rate, while a lot of other categories of investor will want residential property exposure without the palaver of buying to let.

And as I say, I think it checks out in terms of properly tested innovation – something we could have done with in the last five years or more. But of course, the real test will be whether it passes muster with your research.
Useful house price diagram
Tuesday, December 20th, 2011

The link below is from the CML which provides a useful graphical insight into what all this house price data means by placing different surveys in a relevant time line in the house price buying process. I like it. It’s useful. Who ever said all press offices ever do at Christmas is spend their time quaffing champagne? The CML spend it making charts.

Anyway as people get more concerned about house prices, (rises, falls, and flat-lining) with prejudices depending on whether they own one or not, this shines a bit of light. It might even help the odd journalist understand what they are writing about when they discuss about house prices. Imagine that. Here is the link –

So Rock still owes £19,023,000,000 with between £400m and £650m written off
Thursday, November 17th, 2011

Forgive the Money Debate while I do some sums on the back of a metaphorical envelope.

Take one bearded entrepreneur with around £777m, which he gives to the Government, which doesn’t ‘alf need the dosh. This could reach £1bn. Mortgage Finance Gazette has the best break down. The Government has injected £1.4bn into Northern Rock plc so the UK loses between £400m and perhaps £650m, depending partly on what might be raised from a future IPO of Virgin Rock or whatever it is called.

But that is just the good bank. It does not include the Government loan that bad bank UK Asset Resolution has on its books. Effectively the Rock bit of the bad bank, (not the Bradford and Bungling bit) owes £20.7bn though the Rock half did pay back a billion in August so at least it is moving in the right direction. Now I am a financial journalist so my maths may of course be wrong, but my calculations suggest that the country is still owed £19, 923,000,000 and we have effectively written off £400 t0 £650m, though I’m prepared to be corrected by anyone with a better abacus. And this is what passes for good news these days?