AMI fears FirstBuy will undercut commercial products

The Government’s extension of the FirstBuy scheme may have “cut the ground from under” commercial products such as the Castle Trust partnership mortgage, according to the Association of Mortgage Intermediaries.

The partnership mortgage allow borrowers who have a 20 per cent deposit to take out a 20 per cent loan from Castle Trust, making them eligible for a 60 per cent loan-to-value repayment mortgage from another lender.

No interest is charged on the loan but when the property is sold, the borrower must repay the loan in full. If the property increases in value, the borrower must pay 40 per cent of the increase to Castle Trust and if the property decreases in value, Castle Trust will pay 20 per cent of the loss on a house purchase.

AMI chief executive Robert Sinclair says: “This product which looks like an imitation of the Castle Trust product shows a government that has been listening to the market, but may have cut the ground from under that commercial product.”

But Castle Trust chief executive Sean Oldfield says: “There are around 25 million existing homes and just over 100,000 new homes built per year, so we are excited to be providing homebuyers a huge range of purchase opportunities alongside the government.”