JC Flowers pumps $105 million into new UK mortgage firm

LONDON (Reuters) - U.S. private equity firm JC Flowers is investing 65 million pounds ($105 million) to help establish a new British mortgage provider and investment company called Castle Trust.

Castle Trust said on Sunday that it will provide UK home-buyers with an extra source of funding in addition to bank lending, as well as offering people the chance to invest in the housing market through saving products linked to house prices.

Castle Trust will be chaired by Callum McCarthy, the former chairman of the Financial Services Authority who is chairman of JC Flower's European arm.

Under the company's lending scheme, home-buyers will take out a regular mortgage but can also borrow 20 percent of the cost of the house from Castle Trust. When they come to sell the house or reach the end of their mortgage term, they will owe Castle Trust 40 percent of any profit made on the sale.

Home ownership is popular in Britain but the cost of buying a property has risen beyond the reach of some people after lenders tightened borrowing terms following the financial crisis.

"Castle Trust aims to bring solutions to problems which have too long affected the UK housing market," McCarthy said in a statement.

($1 = 0.6193 British pounds)

(Reporting by Sarah Young; editing by Patrick Graham)