Bank launches profit-share mortgage

Morgan Stanley said today that it has launched a new product to help first-time buyers who find themselves priced out of the property market.

The product, known as Flexishare, will allow homeowners to borrow more than they can get from traditional lenders. In return they will have to give up some of the future increase in the value of their home.

Similar government-backed schemes already operate but they are restricted to key workers and low-income families.

Flexishare, which is being sold by the investment bank's new mortgage arm, Advantage, is available to anyone who cannot borrow enough from conventional lenders to buy the property they want.

Most conventional mortgage companies only lend people around three to four times their salary and up to 100% of a property's value.

Flexishare offers a standard mortgage of up to 80% of the property price and a "residential ownership loan" of up to 35% of the home's value, at a lower interest rate.

Borrowers need to put down a deposit of at least 5%, but the scheme means they can buy a property even if they can only raise 60% of the purchase price on their income.

In return Advantage shares any increase in the value of the property, based on the size of the residential ownership loan.

If the loan is 15% of the property and the value has increased when you come to sell, Advantage gets 15% of that increase. If however the value falls, the amount you have to repay on the loan element decreases.

The government welcomed the launch and said it was hoping to encourage more private companies to develop homeownership schemes aimed at families who had been priced out of the market.

The housing minister, Yvette Cooper, said: "As house prices have gone up, more and more families who could keep up with regular mortgage payments can't manage that first step onto the ladder."