Sean Oldfield is revolutionizing
the mortgage industry with innovative equity
loans company, Castle Trust.
Sean
Oldfield is a glutton for punishment. In 2002, he gave up a lucrative career in
banking to pursue a grueling judo career.
He travelled
around Europe on his motorbike, training in different judo clubs, with the aim of competing in
the 2004 Athens Olympics.
The
Australian, who has been living in the UK for the past 12 years, represented
his home country at the Canadian and US opens.
After two
years on the road, however, he realized he would never be a world champion.
“I started
training at 19, which is very late,” he explained. “Most guys start when they
are three. I realized that if I made it to the Olympics, I would probably get
knocked out in the first round and end up penniless.”
Mr. Oldfield cut his losses and returned to
Macquarie Bank, where he stayed for a further four years. But his desire to
take on a new challenge then took him to Moscow, where a burgeoning financial
services industry was taking hold.
“I was
interested in the mortgage market out there,” he said. “People were trying to
buy their homes out of the communist regime. Previously, people had only been
able to buy their homes if they had cash. The transfers were literally made
with cash, too – big briefcases of the stuff.”
Mr Oldfield
set about starting a company but soon attracted heat from the local gangsters.
“I ended up getting shot at,” he said. “In Moscow, you need to buy protection
when you start a business. The Russian word for it is 'krysha’, which means
roof.
“If you
don’t have the right protection, either you die or your business dies.”
A local
cartel offered its “roof” to Mr. Oldfield in the very early days of his
start-up. He refused, saying that he didn’t believe they would do the job very
well. “They shot at me to prove that they would have been just fine at their
job,” said Mr. Oldfield.
Rather than
return to Macquarie, cap in hand, Mr. Oldfield decided to come back to the UK,
take stock and work on an innovative new business model that he’d been turning
around in his mind for years.
“I have a
personal interest in the mortgage system,” he said. “When I was 11 years old,
interest rates in Australia went from single digits to 18pc. My mum was a high
school math teacher and, as a single mum, really struggled to make her interest
payments every month.”
Mr Oldfield
remembers sitting in his local bank manager’s office with his mother, pleading
for more time to pay.
In June
2008, he began fleshing out an idea for a two-pronged business, one side of
which was an equity loans provider and the other an investment product linked
to the national housing index. He called the business Castle Trust.
The idea was
to “recycle” money between the two businesses so that those who had money to
invest could get a return based on house prices, while those who needed finance
could unlock the value of their homes with minimal risk.
Mr Oldfield
explained: “Unlike traditional mortgages, with equity loans there are no
monthly payments. We will lend up to 20pc of the value of the house. If the
house doesn’t increase in value, you just pay us back the original principle.
If it goes up in value, we take a 40pc share of the growth.”
If the house
depreciates in value, Castle Trust shares in the fall; on a house worth 10pc
less, you pay back 10pc less.
The model
doesn’t replace the old-fashioned mortgage but raises cash for those who cannot
secure finance in the usual way. Castle Trust’s services have been used by
divorcing couples who want to buy a second home without taking out a further
mortgage on the first. Entrepreneurs also use the model, to raise cash for
their start-ups, but the biggest markets are “bank-of-mum-and-dad” customers
who want to help their children get on the housing ladder. The buy-to-let
market is also growing fast.
Getting
Castle Trust off the ground has been Mr. Oldfield’s greatest challenge to date.
“It took four and a half years from creating the concept to signing our first
customer,” he said. “2008 was the worst time to try to raise money for a new
business with the financial crisis.”
It took more
than two years for Mr. Oldfield to secure a £65m investment from private equity
firm JC Flowers. “Raising that kind of money for a business that only exists on
a PowerPoint presentation, when you’re working from your lounge, is really
tough,” he said.
Castle Trust
is the first business of its kind in the world. The investment side of the
business is based on UK house prices, and the Land Registry only released
comprehensive data on transactions in early 2008. It cost £15m just to get the
company off the ground with all the required regulation. “You wouldn’t believe
the red tape you face as a brand new financial services business,” said Mr
Oldfield.
Consumers
can invest through their Isa or direct with Castle Trust. The company is now
one year old and employs 30 staff. It is chaired by Callum McCarthy, former
chairman of the Financial Services Authority. Deirdre Hutton, former chair of
the National Consumer Council, and ex-environment minister Lord Deben are also
on the board. “They’ve had faith in the business from the beginning,” said Mr.
Oldfield.
Castle Trust
has been boosted by the Government’s Help to Buy scheme. “It has an equity loan
built in just like ours,” explained Mr. Oldfield, who credits his judo training
for getting him through the tough start-up of the business.
“During that
time, I got married and had my first son,” he said.
“I didn’t
get my first pay cheque till he was one. Once every couple of months I would
think, 'I should just go and get a job’.
“But I never
gave up. I was patient through necessity. It takes a huge amount of tenacity
and drive to knock down walls that seem impenetrable but now we’ve reached the
tipping point.
“I was
behind the curve with judo but I’m way ahead of the curve with Castle Trust.”
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